Should I refinance?

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kevin99
Posts: 38
Joined: Sun Feb 04, 2018 11:42 pm

Should I refinance?

Post by kevin99 »

Age: Wife and I are 39 with two kids ages 6 and 1
Income: 150K base + ~50K potential commissions, wife lost her job in march (still looking for work in the 60-80K range)
Current Loan: 398,000 on 450K House in NYC suburb @3.75% (29.2 years left). since COVID house prices in our neighborhood have gone up and are selling for ~$500K

Total 3 fund Portfolio (75/25 AA): ~1.9M (breakdown below)
Cash or cash equivalents: 160K (higher than usual reserve because of job loss, and potential upcoming home repairs)
Debt: None except Mortgage
Taxable: 350K
IRAs/401K/403bs: 860K
Roths: 360K
529: 87K
HSA: 41K

Expenses: 5-6K per month, not paying for daycare (2K/month) now because wife is unemployed and home.

We plan to stay here long term but plans can always change. Right now mortgage rates are around 3.1% for 30 year loans, but rates are a bit higher for refinancing. We also only put 10% down since we thought rates really low when we purchased and we would rather have the extra cash as a buffer.

It seems that in order to get a decent rate closer to 3% I would have to shell out quite a bit of cash to lower my loan-to-value ratio. Around 50K + 7K mortgage taxes/fees. This doesn't seem like a good idea given our current employment situation and poor job market. I'm unsure if saving a $150-200/month for 30 years is worth losing 57K in liquidity now.

Question: Does a refinance still make sense with the given info? I think no, but please let me know what you would you do in this situation.
dsmil
Posts: 742
Joined: Tue Sep 08, 2009 10:51 am

Re: Should I refinance?

Post by dsmil »

Assuming good credit, I would assume you'd be seeing rates closer to 2.5-2.75%. Have you shopped around? I also don't know about the rationale that you need to shell out a bunch of cash to get a better rate. If your house appraises for $500k, then your LTV would decrease to 80% and you'd eliminate PMI with the same loan amount. I don't think shelling out more than 20% will do much for you. Anyway, you could always take a slightly higher rate in order to get lender credits which cover the refinancing costs. That way there is no risk if you wind up moving or something.
katrid11
Posts: 107
Joined: Wed Oct 31, 2018 10:11 am

Re: Should I refinance?

Post by katrid11 »

Are you sure you need to shell out cash?
In your case I would be looking for a refi of $398k on a home valued at $500k. Thats a basic 80/20 loan which is standard and with good credit should get you a 3% or less loan.

You would need to pay for an appraisal to get that loan but $400-500 is worth saving the cash investment.

What else is in the $7k fees? I ask b/c my refi earlier this year was $2200 including title insurance for the bank. Are you escrowing?
FiscallyResponsible
Posts: 93
Joined: Mon Feb 22, 2016 9:02 pm

Re: Should I refinance?

Post by FiscallyResponsible »

Check w/Lenderfi, Loan Cabin (they may be slow to respond), Costco, Loan Depot. I just did cash out 30 year at 2.5% with about ~1000 in closing costs. If you look at the mega refinance thread, you will see a lot of comparison shopping for the current market.

And yes, you should refinance. I would target a no-cost refinance if you can.
Golf maniac
Posts: 716
Joined: Wed Dec 27, 2017 2:02 pm
Location: Florida

Re: Should I refinance?

Post by Golf maniac »

For OP, please ignore what rates others get across the country. They are not applicable to you or your situation. Rates and closing costs are very specific to location, property, equity, and your personal credit history. Shopping rates is smart and I assume you have done that. In your specific situation I would not put additional money down to lower rate. There are mortgage calculators out there to show your break even point. Good luck!
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