Refinancing - Take Cash Out and Keep Payment the Same?

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BHawks87
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Joined: Mon May 07, 2012 2:03 am

Refinancing - Take Cash Out and Keep Payment the Same?

Post by BHawks87 »

About to do a refinance from 3.75 down to 2.875. I am currently considering two options:

1.) No cash out and reduce my monthly P&I payment by $85ish

2.) Take a $17k cash out and keep my P&I payment where it's currently at.

Both options would save me interest if I let it ride 30 years over what I currently have. I am considering the cash out option and buying another rental property or just throwing it into VTWAX.

Did some calculations and if I did the cash out and let it ride for 30 years I would pay roughly $10k more in interest. If I did option 1 and invested the monthly savings into stocks vs option 2 and invested the $17k into stocks it seems I would have $100kish less after 30 years.

What would you do in my shoes?
Last edited by BHawks87 on Sat Nov 21, 2020 4:33 pm, edited 1 time in total.
mhalley
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Re: Refinancing - Take Cash Out and Keep Payment the Same?

Post by mhalley »

I would try to get rid of the pmi asap. Can you refi to an 80/10/10 or something?
https://www.nerdwallet.com/blog/mortgag ... avoid-pmi/
Topic Author
BHawks87
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Re: Refinancing - Take Cash Out and Keep Payment the Same?

Post by BHawks87 »

mhalley wrote: Sat Nov 21, 2020 4:00 pm I would try to get rid of the pmi asap. Can you refi to an 80/10/10 or something?
https://www.nerdwallet.com/blog/mortgag ... avoid-pmi/
Oops meant P&I not PMI! Sorry about that.
presto987
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Re: Refinancing - Take Cash Out and Keep Payment the Same?

Post by presto987 »

Doing a cash out usually results in a higher cost or higher interest rate, because Fannie/Freddie charge between 0.375 and 0.625 points for a cash out depending on LTV.

Normally I’d expect that it wouldn’t be worth the cost if you’re taking only 17k out.

Are you saying that there is no pricing difference in your case?
playtothebeat
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Re: Refinancing - Take Cash Out and Keep Payment the Same?

Post by playtothebeat »

You’re going down by a full percentage point but only saving $85/month? Is that right? Just a really small loan?

Make sure there are no closing costs as that payback will be quite long I suspect.
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abuss368
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Re: Refinancing - Take Cash Out and Keep Payment the Same?

Post by abuss368 »

I am looking at many of the same options right now. Our mortgage is 3.65%. I can lower the interest rate but the payment difference is not much and the closing costs are approximately $4,500.

The problem is, and I think this is impacting you as well, rates are so low now that is does not make much sense. Years ago there was a much larger impact.

In any event, I don’t like debt. I would consider option 1 or perhaps increase the monthly payment (if you can cash flow it) and pay down / off much earlier.
John C. Bogle: “Simplicity is the master key to financial success."
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anon_investor
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Re: Refinancing - Take Cash Out and Keep Payment the Same?

Post by anon_investor »

abuss368 wrote: Sat Nov 21, 2020 6:23 pm I am looking at many of the same options right now. Our mortgage is 3.65%. I can lower the interest rate but the payment difference is not much and the closing costs are approximately $4,500.

The problem is, and I think this is impacting you as well, rates are so low now that is does not make much sense. Years ago there was a much larger impact.

In any event, I don’t like debt. I would consider option 1 or perhaps increase the monthly payment (if you can cash flow it) and pay down / off much earlier.
Do you have a low balance? In the refinance mega thread many have posted their experience getting no cost refis at very good rates, but that does not usually apply to low balance loans.

Personally in July I was able to refi to 2.75% 30yr fix at $0 cost (only paid prepaids and funded escrow, which are not costs and things I would be paying regardless if I did a refi or not).

To the OP, what will you do with the $17k?
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abuss368
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Re: Refinancing - Take Cash Out and Keep Payment the Same?

Post by abuss368 »

anon_investor wrote: Sat Nov 21, 2020 6:26 pm
abuss368 wrote: Sat Nov 21, 2020 6:23 pm I am looking at many of the same options right now. Our mortgage is 3.65%. I can lower the interest rate but the payment difference is not much and the closing costs are approximately $4,500.

The problem is, and I think this is impacting you as well, rates are so low now that is does not make much sense. Years ago there was a much larger impact.

In any event, I don’t like debt. I would consider option 1 or perhaps increase the monthly payment (if you can cash flow it) and pay down / off much earlier.
Do you have a low balance? In the refinance mega thread many have posted their experience getting no cost refis at very good rates, but that does not usually apply to low balance loans.

Personally in July I was able to refi to 2.75% 30yr fix at $0 cost (only paid prepaids and funded escrow, which are not costs and things I would be paying regardless if I did a refi or not).

To the OP, what will you do with the $17k?
Where did you obtain a no cost refinance?
John C. Bogle: “Simplicity is the master key to financial success."
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anon_investor
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Re: Refinancing - Take Cash Out and Keep Payment the Same?

Post by anon_investor »

abuss368 wrote: Sat Nov 21, 2020 8:53 pm
anon_investor wrote: Sat Nov 21, 2020 6:26 pm
abuss368 wrote: Sat Nov 21, 2020 6:23 pm I am looking at many of the same options right now. Our mortgage is 3.65%. I can lower the interest rate but the payment difference is not much and the closing costs are approximately $4,500.

The problem is, and I think this is impacting you as well, rates are so low now that is does not make much sense. Years ago there was a much larger impact.

In any event, I don’t like debt. I would consider option 1 or perhaps increase the monthly payment (if you can cash flow it) and pay down / off much earlier.
Do you have a low balance? In the refinance mega thread many have posted their experience getting no cost refis at very good rates, but that does not usually apply to low balance loans.

Personally in July I was able to refi to 2.75% 30yr fix at $0 cost (only paid prepaids and funded escrow, which are not costs and things I would be paying regardless if I did a refi or not).

To the OP, what will you do with the $17k?
Where did you obtain a no cost refinance?
LenderFi. Check out the Refinance Mega Thread:
viewtopic.php?f=2&t=289559&start=7900
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