Refinance from 15yr 2.75% to 30yr 3.5%?

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m@ver1ck
Posts: 136
Joined: Fri Sep 14, 2018 2:18 pm

Refinance from 15yr 2.75% to 30yr 3.5%?

Post by m@ver1ck » Fri Feb 14, 2020 11:37 am

I don’t think I have the right mental models/framework to think about this.

I’m currently in a 15yr/2.75% mortgage, in a VHCOL area.
House worth around 1M, 230K and 9yrs left on mortgage.

Age:44, single earner.

Funds available:
Taxable:330K
Retirement: 900K
529s (2 kids: 9 and 3): around 60K each.
I have access to a Mega-BackDoor ROTH IRA and so plan to save about 55K for retirement every year.
Income (including bonuses) is now about 300K to 400K a year... bonuses have been doubling every two years for the past 4-5 yrs.

Stay the course? Or refi? I’m not sure how to think about this problem space.

z3r0c00l
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by z3r0c00l » Fri Feb 14, 2020 11:38 am

Why borrow money for twice as long at a higher interest rate if you can afford to pay it down sooner and cheaper? No brainer for me unless you need the money now, which I don't think you do.

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greg24
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by greg24 » Fri Feb 14, 2020 11:40 am

Why are you considering it?

Doesn't make sense to me.

J45
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by J45 » Fri Feb 14, 2020 11:46 am

Not just higher interest rate but you will also spend on refinancing.

With only 9 years left, just suck it up for few more years :D

Gill
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by Gill » Fri Feb 14, 2020 11:59 am

You have a very attractive interest rate with only nine years to go. Why would you want to refinance for a longer term at a higher rate? Makes absolutely no sense.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Topic Author
m@ver1ck
Posts: 136
Joined: Fri Sep 14, 2018 2:18 pm

Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by m@ver1ck » Fri Feb 14, 2020 12:04 pm

I know -
Looking at buying a bigger house. This one is around 2000 sq ft. Next one will be 1.3M - 1.5M.
However with current mortgage, new debt to income ratio doesn’t allow for a new loan. I would have to sell before I buy / and not sure how that would work out...

still - also looking at retiring at 55 or so - so probably better to stay put.

But - a bigger home means more working for a year or
Two more - which is fine by me...
Last edited by m@ver1ck on Fri Feb 14, 2020 12:05 pm, edited 1 time in total.

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Wiggums
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by Wiggums » Fri Feb 14, 2020 12:05 pm

z3r0c00l wrote:
Fri Feb 14, 2020 11:38 am
Why borrow money for twice as long at a higher interest rate if you can afford to pay it down sooner and cheaper? No brainer for me unless you need the money now, which I don't think you do.
+1

drgenefish
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by drgenefish » Sat Feb 15, 2020 11:06 am

People sell and buy simultaneously all the time. You just have to make offers contingent on your house selling and you getting financing.

It’s def a little more hassle and stress with timing everything...but your realtors will handle that all. Biggest downside is you’ll have to move all at once in a day rather than having both places for a few weeks.

The nice thing with your situation is you can take your time looking and only move if you find a perfect house and get a great offer on yours.

I’d especially not waste money on refi if you’re gonna move.

Sometimes I get bored and just wanna make a move for the sake of making a move. When just plugging away and staying the course is the best move. Not saying this is you...but just in case. Sounds like you’re doing great,

bradinsky
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by bradinsky » Sat Feb 15, 2020 2:42 pm

I sometimes struggle to understand how a 2000 sq. ft. home isn’t large enough for a family of 4. Especially in a VHCOL area and the idea that you might retire in 11 years. Also, what if something were to happen with your job, or you were to become sick/disabled. All things to consider. Best of luck with your decision!

Millennial
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by Millennial » Sat Feb 15, 2020 10:26 pm

When I did something similar, the bank just needed to see an accepted offer on the house we were selling before the closing date of the house we were buying. As long as they had that, they removed house 1 mortgage from the debt/income ratio. I owned both houses for about 6 weeks, but they didn't care. I did not need a selling contingency (which is a non-starter in my area).

mc2
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by mc2 » Sun Feb 16, 2020 9:03 am

bradinsky wrote:
Sat Feb 15, 2020 2:42 pm
I sometimes struggle to understand how a 2000 sq. ft. home isn’t large enough for a family of 4. Especially in a VHCOL area and the idea that you might retire in 11 years. Also, what if something were to happen with your job, or you were to become sick/disabled. All things to consider. Best of luck with your decision!
I agree. However, we are 5 in 1650 sf home and it’s tight. Layout is everything. Seems like OP can afford this. I personally would weigh the tightness of the living situation vs age of kids.

We are jammed but soon kids will be gone and we won’t be asking about downsizing etc.

Finally, do you want to stay in the area p retirement?

Can you get the new house in a cheaper 15 y mortgage?

chevca
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Re: Refinance from 15yr 2.75% to 30yr 3.5%?

Post by chevca » Sun Feb 16, 2020 9:55 am

They're going to want to know why the refinance right before buying another house. That may not work as you plan anyway. Depends on the place probably, I've had quite different underwriting experiences with different lenders.

Figure out a way to buy and sell at the same time.

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