At staff's urging, the board agreed to have
staff explore permanent refinancing (getting a loan with
no balloon). Staff shopped our debt aggressively and were
able to get excellent terms:
As of March 2004, ICC had a commitment from Bank of
America to refinance our $1.8 million in debt at 6.35%
for 15 years, with no balloon. We'll make about $190k in
payments annually.
It's kind of tricky to figure out exactly how much
this saves us in interest, because the two old loans we
combined had 5-year balloons, and there's no telling what
interest rate we would have gotten five years from now.
Plus, one of the loans had a variable rate to boot. If we
assume a 7.5% interest rate for both the old loans, then
refinancing saves us $674,000 over the life of the
loans.
1970's. We bought our first house in 1970
and most of the rest by 1975. We had a cocktail of
mortgages covering all of them. I don't have many details
about these individual mortgages.
1983. We spent $1.2M to buy three crappy,
overpriced apartment complexes. We financed it with a
regular mortgage of $800k and we borrowed another
$400k against the houses we already owned. We lost money
on these overpriced apartments hand over fist right away
and immediately tried to sell them. By the time we sold
the last one in 1989 we'd lost about $700k on that
debacle.
1992. Refinanced with an interest-only loan,
meaning our payments didn't reduce our debt.
Unfortunately this was the only kind of loan we could
get.
1995. Finally got permanent financing: We
refinanced all houses with a normal 15-year mortgage,
$670k debt, 10.388% interest. This was our first
permanent financing in years.
2001. To cover the lost rent from Arrakis which
burned down in Dec. 2000, and also because interest rates
were ridiculously low, we refinanced. We combined the
~$551k left n our mortgage with the ~$220k left on our
NCB renovation loan, and refinanced the ~$731k total at
8% for 15 years. That reduced our yearl debt payments
from ~$160k to ~$85k, saving us ~$75k/year. The icing on
the cake was that we'd pay only an extra ~$21k in
interest over the life of the loan by extending the term,
because the interest rate was so low. Another bonus: The
bank let us use only two houses as equity instead of all
five, meaning that we now own three houses free and clear
(plus one charred lot).
2003. We refinanced again, combining our
existing loan with money we borrowed to buy 1910 Rio
Grande. Terms were $1.17M principal, 20-year
amortization, 6.5% for five years, annual payments of
~$106k, and a balloon in five years. (Ack! Return of the
balloon!) Collateral is Helios, French, and Royal.
When we rebuilt Arrakis we got a loan to do that:
$616k principal, 20-year amortization, variable interest
rate starting at 7% (1.5% over prime at
closing, fixed for 3 years, with a cap of 8%, and then
fixed for another 3 years, but the balloon will be due
first at 5 years), initial annual payments of
~$58,146, 5-year balloon (ack!). Closing costs were
around $7k (appraisal, insurance, etc.).
2004. See "Current Debt" at the top of this
page.
