KaMLuNg

iTrader: (5)

so with rates dropping... i started to shop around and see if i could save some money on my current 4.125% 30 yr fixed... a lot of the going rates seem to be in the 3.5 mark... we've been in the house 2 yrs and plan to be here for a very long time... i reached out to my current broker to see if there was anything he could do if i stayed with them...

at the same time, i'm considering dropping some serious money on some renos... i'm estimating ~$50k-75k and thinking about funding options... rather than drain my savings... does it make sense to take out a HELOC or if i do the refi borrow against the equity as long as it keeps me out of a PMI situation?

my dilemma is that i could probably get a much better separate rate on the HELOC but obviously the term is much shorter... if i roll it into the mortgage of the house, i'm extending the payment but with the slight offset in interest, i could just throw more money into my monthly payment to knock down the principle faster...

thoughts? anyone been thru this before?

Anachostic

My only comment is that a Refi is going to come with closing costs that can make the savings not as much worth it. It sounds like you have 28 yrs left to go and you want to extend the loan back to 30 years. Try a calculator like https://www.zillow.com/mortgage-calc...ce-calculator/ or Refinance Calculator - Calculate Your Savings from Refinancing to determine if a refi makes financial sense.

LaCostaRacer

You need to compare the rates and see what's best in your case. I like HELOCs because you get to keep your options open and your costs down.

A refi locks you into upfront costs and may make it easier to take out more cash than you really need- cash-out refis will sometimes require a higher interest rate than a normal refi too. If you take 75K out and don't put that cash to work right away- it will cost you (after tax) 5+% since you're borrowing at 3-4% and will need to earn 5+% to pay your taxes on interest and pay the interest on the extra cash borrowed. Good luck finding a safe investment that does that these days of 0.25% interest rates.

KaMLuNg

iTrader: (5)

thanks my initial thought was that if i could refi at a lower rate, and cash out (even with rolling the closing costs into the loan) i'd be at or even slightly less of a monthly payment... yes i essentially extend the loan 2 more years now, but that is what i would use to fund the renovation... thanks for the links...

thanks... i spoke to my broker and he had the same advice... we are going to refi first so my monthly payment should come down a few hundred bucks on the current loan value... then we will use the appriasal from the refi to secure a HELOC... current rate on the HELOC is prime less .75% so that flexibility helps me over the next x number of years to fund different projects...

s2kstephen

That's what I just did. I did a refi to drop from 4.5% to 3.5% & so I could paid down the loan the 30% equity. Saved me 1% interest and a few hundred $ a month. To be able to tap into that cash again, I got a HELOC (30yr fixed) to have it handy for more real estate ventures.

atomlinks

I'm not sure how I came across this thread, but I would say do whatever it takes to put extra $$ towards your principal every chance you get. Save up for the reno's and pay with cash. It's really amazing how many years you can shave off your mortgage.

I came to my wife when I was 27 years old and I said "I wanna pay off the house in 3-4years" She thought I was nuts! Anyway I had a plan and we ended up sacrificing/ rice and beans budget for 3 years but I had the mortgage paid off by the time I was 30yrs old with triple payments. If you are married and can swing it, try living off the wife's salary and put your entire paycheck towards the mortgage. It will be a rough @ first but when you get rid of all of your debt there is no better feeling in the world.