Author Topic: $65k in Debt, Refinance Mortgage  (Read 7389 times)

Broadway2019

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$65k in Debt, Refinance Mortgage
« on: December 12, 2017, 04:30:53 PM »
I have $65k on 0-5% interest credit cards. $35k is 0$ and the rest is at 5% APR. I can pay this off by end of next year if I am really aggressive and stay the course. At max it will take me 18 months.

I currently have a 20 year mortgage. Should I refinance to 30 year to free up cash flow? This would free up about $600 a month.

Or I could reduce my 401k contribution to just the match. This would also free up $500 or so a month.

What would you do? I am not interested in posting along why I have $65k debt post - it is because of a bad investment.

« Last Edit: December 12, 2017, 04:36:39 PM by kwarden13 »

Christof

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Re: $65k in Debt, Refinance Mortgage
« Reply #1 on: December 12, 2017, 04:51:16 PM »
What's the total cost of each of these options including changes in interest for the mortgages?

5% APR doesn't sound that high. Return rates for many investment options should on average be higher or not very much lower. So long term you basically use your 401K gains to pay interest on the credit card. Whether you pay money directly to the credit card company or indirectly doesn't change that equation.

I'd think that tax might have a much higher impact here. You credit card is paid back on post-tax dollars, a 401k founded on pre-tax money.

RWD

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Re: $65k in Debt, Refinance Mortgage
« Reply #2 on: December 12, 2017, 04:54:59 PM »
When do the promotional rates end? At the very least you should keep the 0% debt for as long as possible.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #3 on: December 12, 2017, 04:59:33 PM »
The promotional rates end January 2019. So I am confident I can wipe out at least 80% of this debt by then. I guess I am worried having this much debt as I am one who always pays off my credit card every month. So this really makes me anxious.

Worst case is I can do another balance transfer next January and pay a 3% fee on what is left. Reducing my 401k does not seem to make much sense unless I was really in a bind. And refinancing would add more interest, however, I heard people on this forum saying having a mortgage is a good thing. So wondering if I should be paying it down faster using 20 year vs refinancing to a 30 year.

Christof

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Re: $65k in Debt, Refinance Mortgage
« Reply #4 on: December 12, 2017, 05:13:42 PM »
Whether a mortgage is better does depend:

a) Do you itemize or do you use the standard deduction? You only benefit if you exceed the standard deduction unless you are a landlord and this is a business expense.

b) Investments can make more money than a mortgage *on average*. Would you take a credit at the mortgage's interest rate to invest?

c) Is cash flow a risk factor? If you can't meed your monthly obligations in the worst case (like being laid off) it might be useful to reduce your required monthly payments even at the cost of increased interest rates to reduce your risk exposure. Often you can still pay down the principal at the same rate as before if you mortgage is the most expensive credit after considering tax benefits.

SwordGuy

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Re: $65k in Debt, Refinance Mortgage
« Reply #5 on: December 12, 2017, 08:33:18 PM »
You can't get back the "lost" $ contribution slots in a 401k.   Plus, reducing your contributions will just up your taxes.  If you're in a position to pay back $65k of CC debt in 12-18 months, there's no need to be that drastic.

As for the mortgage, what will it cost you to refinance?   What will the interest rate be if you do?     How much will you save on CC interest as you pay off those bills?    How much more in interest will you pay at a new 30 year term?

Plus, there is also a long running thread on whether it's better to pay off a very low interest rate mortgage early or invest the "extra" payments.  In this case, the "extra" payments would be the amount you would improve your cash flow by.
I'm assuming you know how to find and use an online mortgage calculator or excel for the calculations.

frugaliknowit

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Re: $65k in Debt, Refinance Mortgage
« Reply #6 on: December 15, 2017, 10:23:23 AM »
Since you say this:  "I guess I am worried having this much debt as I am one who always pays off my credit card every month. So this really makes me anxious", I would stop the unmatched 401k contributions until it's paid off.  Sleeping better at night is important, especially when there's not a big difference between the expected after tax returns.

I would NOT go the refinance route.

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #7 on: December 15, 2017, 10:43:26 AM »
everything sword guy said.  If it makes sense to REFI i'd refi and get 10 more years of a fixed rate in the high 3's

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #8 on: December 18, 2017, 06:08:36 AM »
I wanted to give more information on my current situation and what I found out researching about the mortgage rates.

So after December, I will owe $45k in credit card debt at 0% and here is the breakdown.

5% interest - $7,000 - until Dec 2018
0% interest - $31,000 - until Dec 2018
0% interest - $7,000 - until May 2019

In addition, I will owe my mom $15,000 but can pay that back in 1-2 years. So total debt is $60k.

For the mortgage, I have 3.5% for 20 years and a balance of $340,000. I have paid 15% of the total mortgage balance so I pay PMI. I could refinance to a 30 year to free up some money. The rate I was quoted for a 30 year is 3.75. I would only save $400 a month so this does not seem that attractive.

Also, I considered stopping my 401k contribution except for the match which is 6%. This would save me the most per month but I like getting the tax benefits. I make $130,000 a year so be able to tax defer $18k is great. But this would free up about $1000 a month. I currently have $81,000 in my 401k and am 29 years old.

Thoughts?


boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #9 on: December 18, 2017, 06:18:10 AM »
i'd jump on that 30 year rate - you'll come out ahead in both debt paydown and in the long run when you start investing. - I would hope your REFI drops PMI too making that even more inviting.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #10 on: December 18, 2017, 06:38:14 AM »
Should I wait to refinance until PMI would drop? If I wait 6 months I think our house will go up by enough. Essentially our house is worth about $400k on redfin and zillow. I need it to appraise for $20k more to hit 20%.

Also because of my debt, my credit score decreased by over 150 points this month. I don't think I can refinance. I am in such a mess and trying to get out.
« Last Edit: December 18, 2017, 06:58:34 AM by kwarden13 »

Another Reader

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Re: $65k in Debt, Refinance Mortgage
« Reply #11 on: December 18, 2017, 07:03:51 AM »
The 30 year is not a good option because you do not have enough equity to avoid PMI.  In your shoes, I would throw all available cash at the debt, without reducing the retirement contributions.  Cut out all nonessential spending and just pay this off.  Take some more zero percent offers to avoid high interest if necessary.

You are not in a financial position to make $65k speculative investments.  Pay this off, learn your lesson, and don't do it again.


Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #12 on: December 18, 2017, 07:58:14 AM »
Thanks, Another Reader and Boarder42! I am so stressed because I have this huge debt plus my mortgage, because of escrow shortage, is going up by $475 a month starting in Feb 2018. I can pay $3k cash to avoid $250 a month of it, but really need to pay down this debt. So may just take the hit and have a tough year paying everything. Then by this time next year look at refinancing when I will be in a better position to eliminate PMI.

Also, my credit should go up so that will help too.

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #13 on: December 18, 2017, 08:32:43 AM »
rates are fluid.  by this time next year your rate could be 4.5% or higher.  you dont really know.  I think the smartest financial move would be to have the house appraised and get it above the 20% ownership to get rid of PMI - there is more than one way to rid yourself of PMI you dont have to physically pay it down if the appraisal shows appreciation to the 20% LTV then you can drop the PMI on the new loan. 

You have a hair on fire situation with the CC debt your mortgage should be leveraged as much as possible here.  and if you REFI today - you likely could find a no cost REFI company - you lock in a great rate for a long time and free up capital for you debt emergency.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #14 on: December 18, 2017, 08:42:43 AM »
Boarder42, I will contact a refinance company to find out my options. Do you know of any good tool to see the appraisal? Would they maybe appraise it for more than zillow/redfin. I am wondering if they can fudge it a little to make it happen.

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #15 on: December 18, 2017, 08:55:23 AM »
Boarder42, I will contact a refinance company to find out my options. Do you know of any good tool to see the appraisal? Would they maybe appraise it for more than zillow/redfin. I am wondering if they can fudge it a little to make it happen.

i would recommend looking towards a mortgage broker who can help you facilitate this - they usually can influence the appraiser as they typically have appraisers they frequently use.  I befriended a mortgage broker a whle ago who does no cost REFI's in MO and KS - not sure your location but i'd recommend looking into one.  Its in their best interest to get you REFI'd b/c otherwise they dont make any money.  - What my broker did for me when i was REFI'ing out of PMI during my first of 6 REFI's was to have his appraiser just look my house up on zillow to see if he thought he could get it to appraise for what we needed to drop PMI and he thought they could easily and it did. 

Dicey

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Re: $65k in Debt, Refinance Mortgage
« Reply #16 on: December 18, 2017, 12:12:39 PM »
Not gonna comment about "fudging", but I will share this little tale.

A couple of years ago, we re-fi'd one of our rentals, while we were buying another. We used a local, landlord-friendly bank for both. We were only chasing rates, not cashing out or trying to get rid of MI (didn't have it).

The development the properties are in has tons of variables. I spoke with the appraiser on the phone beforehand. I told her about a lot of the builder upgrades that were originally available and how to spot them. Extended garage (4') vs. EXTENDED garage (6'), various lot and kitchen upgrades, etc. The upshot was that she chose her comps very carefully and the resulting appraisal was higher than I could ever hope to sell the house for in the current market. My time spent with her was very worthwhile.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #17 on: December 22, 2017, 04:39:12 PM »
Ok so I have two options from a local lender who has been very helpful and could get me out of PMI. Neither option sounds that good to me.

Current Situation: 20 Year Fixed Rate Interest rate: 3.50%
Monthly payment: $2,869.39 (broken down as $2,041.54 principal and interest + $320.43 property taxes + $51.17 hazard insurance+$252.45 shortage in escrow account)
I think the shortage amount will go away once we are caught up though in escrow. So really it's $2616.

Option #1: 20 Year Fixed Rate Interest rate: 3.750%
Monthly payment: $2,411.14 (broken down as $2,039.54 principal and interest + $320.43 property taxes + $51.17 hazard insurance)
Estimated monthly savings: $458.25 (which is higher because we are also curing your escrow shortage with the refinance)

Option #2:30 Year Fixed Rate  Interest rate: 4.125%
Monthly payment: $2,038.80 (broken down as $1667.20 principal and interest + $320.43 property taxes + $51.17 hazard insurance)
Estimated monthly savings: $830.59 (which is higher because we also are curing your escrow shortage with the refinance)

Both options include closing costs of approximately $3,000 which are wrapped in the new loan.  The only out of pocket expense to you is the appraisal which will cost $450 and credit report of $35.

Would you refinance? I am leaning towards not refinancing.


boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #18 on: December 23, 2017, 06:14:17 AM »
Yes you should refi. In ioriin one you pay off the additional costs in about 3 years and free up cash flow to payoff your debt and then invested in the future.  Option 2 makes even more sense if you plan to stay in your house for 5-6 years.

Not sure why you're assuming either of these is a bad option.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #19 on: December 23, 2017, 06:28:21 AM »
I am comfortable with the 20 year mortgage option, but doesn't the 4.125% seem high for the 30 year?

I think we will end up refinancing to the 20 year.

Tuskalusa

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Re: $65k in Debt, Refinance Mortgage
« Reply #20 on: December 23, 2017, 06:32:45 AM »
Yes, you should refinance. Yes, you should reduce your 401k contributions until your debt is gone. And you should write up a case study and look at your monthly spending. You have a debt emergency. The more resources you deploy at clearing it, the better.

Another Reader

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Re: $65k in Debt, Refinance Mortgage
« Reply #21 on: December 23, 2017, 11:10:01 AM »
Rates have jumped in the last week or two.  They are poised to go up again.

I still would not do this.  I don't see how the local lender can get you out of PMI if you are $20k short of having 20 percent equity.  I would suck it up, cut out all extra spending, and pay this off.  As soon as you can, get rid of the PMI and keep your 3.5 percent mortgage.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #22 on: December 23, 2017, 12:28:56 PM »
Another Reader, why would you not do this? I am curious. Without refinancing my current payment is $2600. By refinancing I get rid of PMI earlier and my payment is $2411. Even after I get rid of PMI, on my current loan, $2400 is the lowest it would go.

So this seems like a good deal on the refinance for the 20 year option.

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #23 on: December 23, 2017, 01:09:11 PM »
Lenders do this by giving you slightly higher than the prime rate another reader. That's how. I have a buddy who has 3.5% fixed for 30 years with no PMI and owns less than 6% of his house. How. Bc he refied at the bottom in 2016 summer and took an 1/8th higher than prime rate.

Dicey

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Re: $65k in Debt, Refinance Mortgage
« Reply #24 on: December 23, 2017, 01:12:59 PM »
I would re-fi in theory, but the latest tax "reform" has screwed the pooch for a LOT of homeowners, so do your research quickly!

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #25 on: December 23, 2017, 01:17:45 PM »
I would re-fi in theory, but the latest tax "reform" has screwed the pooch for a LOT of homeowners, so do your research quickly!

I don't really see how it's screwed it that much. Did it eliminate a large deduction we were taking yes but it really doesn't hurt the math alot at these low rates. Many weren't using the deduction here anyways.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #26 on: December 23, 2017, 01:33:32 PM »
So because of my debt, I can only refinance in my spouse's name. Has anyone ever has their spouse only be on the mortgage but still keep both on the deed/title?

She is uneasy to be on the mortgage solely but I do not really see any downside to this. If anything it provides benefits if anything happens such as foreclosure (very unlikely thought).

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #27 on: December 23, 2017, 01:43:35 PM »
Noreal issue with this it's how both our houses have been. Both on deed. My credit used for the mortgage.

Tuskalusa

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Re: $65k in Debt, Refinance Mortgage
« Reply #28 on: December 23, 2017, 06:30:20 PM »
If I were the spouse, I wouldnít want the mortgage only in my name. The house is owned by both of you, so the debt should be shared.  Is this other debt joint to you and your spouse?  If thatís the case, perhaps thereís a case for an exception. But if your spouse is uncomfortable with having the debt in their name only, it sounds like youíd be trading one issue for another.

I think this situation really points to the fact that you need to clean up that debt as soon as possible. Skip the refi. Dial back your 401k to only get the employer match, cut you expenses, and point everything you have at the debt. Set up a debt snowball (either by interest rate or amount outstanding), and start knocking things out. Itís not a fun situation, but when you get out of this, you should be in a very strong position.

Also, the PMI will eventually drop off, so just keep an eye to your equity and drop it when you can.

Youíll get there. Sounds like you werenít totally sold on the refi anyway, so this development seems to take you back to the original plan.


Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #29 on: December 23, 2017, 06:42:36 PM »
My debt - its only in my name - is at 0% until next year and I just paid $24k of it so that's a good chunk. Its just bad timing with our current house situation. So I owe about $40k right now and get a $12k bonus Jan 12th so should knock some more out. After that I will pay $2k a month until it is gone and whatever other bonuses I get.

My PMI will drop in 4 years. By refinancing we free up over $400 and could use that to pay off debts.
« Last Edit: December 23, 2017, 06:44:09 PM by kwarden13 »

Another Reader

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Re: $65k in Debt, Refinance Mortgage
« Reply #30 on: December 23, 2017, 06:44:53 PM »
Another Reader, why would you not do this? I am curious. Without refinancing my current payment is $2600. By refinancing I get rid of PMI earlier and my payment is $2411. Even after I get rid of PMI, on my current loan, $2400 is the lowest it would go.

So this seems like a good deal on the refinance for the 20 year option.

I don't see how the local lender can get you out of PMI if you are $20k short of having 20 percent equity.

All you have accomplished is to get rid of PMI if you can at a cost of $3,000 and a higher interest rate.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #31 on: December 23, 2017, 06:54:39 PM »
The $3000 cost is actually our escrow shortage. So that is a sunk cost. So the cost is a .25% interest hike but we will avoid $10k or so in pmi payments. I rather have the money now and be able to put it towards debts. Without refinancing and with our escrow shortage, the mortgage goes from $2405 (what we pay today) to $2875 starting February 1. Thatís quite a hike in payment. Once we pay the escrow shortage it will still be $2613 until we get rid of pmi.

Another Reader

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Re: $65k in Debt, Refinance Mortgage
« Reply #32 on: December 23, 2017, 08:17:27 PM »
You have gotten yourself into a cash flow crunch.  You don't have the money to pay the escrow shortage up front, so you will borrow that and pay 4.125 percent interest on it for 20 years.  You can't qualify, so you have to pressure your wife into putting the loan in her name only. 

If lenders are doing refis with a hit to the rate instead of traditional private mortgage insurance, that could be less expensive than keeping your lower rate, depending on when you could get rid of the PMI on the old loan.

My choice would to be to cut all spending and cash flow the $65k, with judicious use of balance transfers.  I would want the lower rate for the long term and pay for my mistake now.  YMMV

Dicey

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Re: $65k in Debt, Refinance Mortgage
« Reply #33 on: December 24, 2017, 09:00:50 AM »
No real issue with this it's how both our houses have been. Both on deed. My credit used for the mortgage.
If you're in a community property state, it doesn't matter much. Recently, we re-fi'd a rental I owned prior to marriage at the same time we were purchasing another rental, both at the same lender. When all the paperwork was done flying, we realized that DH was on both mortgages, but only on title for the new house. No big deal.

For reasons too long to type out on Christmas Eve, our primary home is in his name only. Fortunately, there is no mortgage. My point is that neither our CPA, Financial Planner, or Estate Attorney are too worked up about it because: community property. We'll be working on a new Estate Plan in 2018 and we plan on cleaning things up a bit, but no rush.

Finally, I like AR's response above, so a big +1 to that good advice. Also, try not to ratchet down the retirement savings too much. At your age, losing out there has a higher long-term cost than a little bit more interest paid in the short term.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #34 on: December 27, 2017, 09:44:16 AM »
Any other thoughts on refinancing the mortgage? I think we are going to pull the trigger on the 20 year (option 1) since that keeps our payment the same with only $485 out of pocket costs. Each refinance option is  $2400 in closing costs added to the new loan. I need to let her know as soon as possible since rates keep going up. Also, she is able to drop the PMI because she is only requiring 90% LTV which is what is making the monthly payment lower. Otherwise, it would take us 4 more years paying PMI to drop it.

Details below:
Current Situation: 20 Year Fixed Rate Interest rate: 3.50%
Monthly payment: $2,869.39 (broken down as $2,041.54 principal and interest + $320.43 property taxes + $51.17 hazard insurance+$252.45 shortage in escrow account)
I think the shortage amount will go away once we are caught up though in escrow in January 2019. So it's $2616 in 12 months.

Option #1: 20 Year Fixed Rate Interest rate: 3.750%
Monthly payment: $2,411.14 (broken down as $2,039.54 principal and interest + $320.43 property taxes + $51.17 hazard insurance)
Estimated monthly savings: $458.25 (which is higher because we are also curing your escrow shortage with the refinance)

Option #2:30 Year Fixed Rate  Interest rate: 4.125%
Monthly payment: $2,038.80 (broken down as $1667.20 principal and interest + $320.43 property taxes + $51.17 hazard insurance)
Estimated monthly savings: $830.59 (which is higher because we also are curing your escrow shortage with the refinance)

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #35 on: December 27, 2017, 09:48:47 AM »
I'd still do the 30 year.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #36 on: December 27, 2017, 09:56:34 AM »
Boarder42, I guess I am having trouble wrapping my head around adding 10 years to my mortgage for $800 in savings in year 1 but then only $400 in savings the other years once PMI is dropped.

It does not seem like that much savings for adding 10 years to the mortgage term.

mustachemountain

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Re: $65k in Debt, Refinance Mortgage
« Reply #37 on: December 27, 2017, 10:24:50 AM »
kwarden- you are adding years to your mortgage either way you refi. im surprised no one has mentioned it, to calculate the total cost of mortgage interest in each of your scenarios, not just the monthly nut. that's the real number.

as a fellow "pay my cards in full every month" kind of guy who made a different investment mistake and ended up with $45k on my cards, i can totally relate. i buckled down and in less than 3 years paid it off and saved another $40k. it can be done, and i made half what you do (but my nut was way less than half yours also).

i'm big on buckling down and paying it off, moving to other 0% options as necessary, even with 3% fees for doing so. if you are like me, keeping the debt emergency in your face will keep you focused on killing it, rather than burying it in ??years of mortgage payments. think of the 3% as stupid tax and try to make new mistakes next time.

if i had maxed my 401k when i was your age, i'd be retired now; i still have another decade of hard manual labour to go. you are obviously a better financial planner than i am so ymmv.

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #38 on: December 27, 2017, 04:07:25 PM »
Boarder42, I guess I am having trouble wrapping my head around adding 10 years to my mortgage for $800 in savings in year 1 but then only $400 in savings the other years once PMI is dropped.

It does not seem like that much savings for adding 10 years to the mortgage term.

It's not 800 a year it's 800 a month. And if you plan to stay longer than 5-6 years you'll likely come out ahead on the 30 year.

https://michaelbluejay.com/house/15vs30.html

Here is a 15 vs 30 calculator

Tuskalusa

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Re: $65k in Debt, Refinance Mortgage
« Reply #39 on: December 28, 2017, 08:10:25 AM »
Instead of refinancing, could you review you monthly expenses to see if you could find $800/month elsewhere?

Dicey

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Re: $65k in Debt, Refinance Mortgage
« Reply #40 on: December 28, 2017, 08:16:27 AM »
Instead of refinancing, could you review you monthly expenses to see if you could find $800/month elsewhere?
Will this help the OP get rid of the PMI in a timely manner?

Tuskalusa

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Re: $65k in Debt, Refinance Mortgage
« Reply #41 on: December 28, 2017, 08:59:05 AM »
Hi Dicey, I see your point about the PMI. However, I also see challenges with the refi:

1. The refi can only be in the name of the spouse without the debt. If the debt canít be shared, this feels like a red flag.
2. While PMI is a concern, itís not the underlying issue. The underlying issue is the debt.
3. If the mortgage refi is used to clear the debt, it adds long-term costs via higher interest rates and extended payment periods.

The refi has some immediate term benefit, for sure. However, the long term costs are high. Also, without a look at current costs, I wonder if there might be potential to return to this same situation in a few years. (This has happened to me...I had to make big changes to get out of the cycle.)

So before pulling the trigger, perhaps the OP could double check that thereís not another way to achieve the same goal.

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #42 on: December 28, 2017, 09:05:28 AM »
Hi Dicey, I see your point about the PMI. However, I also see challenges with the refi:

1. The refi can only be in the name of the spouse without the debt. If the debt canít be shared, this feels like a red flag.
2. While PMI is a concern, itís not the underlying issue. The underlying issue is the debt.
3. If the mortgage refi is used to clear the debt, it adds long-term costs via higher interest rates and extended payment periods.

The refi has some immediate term benefit, for sure. However, the long term costs are high. Also, without a look at current costs, I wonder if there might be potential to return to this same situation in a few years. (This has happened to me...I had to make big changes to get out of the cycle.)

So before pulling the trigger, perhaps the OP could double check that thereís not another way to achieve the same goal.

once the debt is paid off the savings can be invested far outweighing the added minor extra interest cost over the years.

if someone isnt disciplined enough they should work on adjusting how they spend money not picking suboptimal options for finances

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #43 on: December 29, 2017, 09:29:23 AM »

once the debt is paid off the savings can be invested far outweighing the added minor extra interest cost over the years.

if someone isnt disciplined enough they should work on adjusting how they spend money not picking suboptimal options for finances

Perhaps I should have started a second post for the mortgage. I am not using it to clear the debt. The debt and mortgage are separate issues.

I currently have a 20-year term and have decided to refinance due to my pmi and recent escrow shortage - when we closed on the house they didn't have us putting enough in there. Essentially I can refinance and drop $193 a month going to PMI and clear up our escrow shortgage. Yes the rate is slightly higher (going from 3.5 to 3.75) but in the end this is a wash. PMI over 4 more years is about $9200 and yes this will add 1 year to our loan. However, I think this is the best option. We don't feel comfortable doing a 30 year so we are deciding not to.

As far as the debt is concerned, I am already now at $40,000 so I just paid off a huge chunk. I have everything on 0% interest cards and make enough to put $2000 a month towards the debt. I am still also contributing max to my 401k and will get a $5000 dollar bonus this year in August. I am confident I will pay this off within 18 months.

I really appreciate everyone's input and Boarder42 I wish we were disciplined enough to say we would invest the extra, but we are not. So it sounds good in theory however the 20 year is sort of a guaranteed savings method for us.

Tuskalusa

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Re: $65k in Debt, Refinance Mortgage
« Reply #44 on: December 29, 2017, 10:19:17 AM »
If youíre going to go through all the work with the refi, then maybe look at the 30-year term. You would free up more cash in the short term. Later on, you could look at another refi when your equity goes up, and if interest rates are more favorable.

Sibley

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Re: $65k in Debt, Refinance Mortgage
« Reply #45 on: December 29, 2017, 05:40:34 PM »
....

As far as the debt is concerned, I am already now at $40,000 so I just paid off a huge chunk. I have everything on 0% interest cards and make enough to put $2000 a month towards the debt. I am still also contributing max to my 401k and will get a $5000 dollar bonus this year in August. I am confident I will pay this off within 18 months.

I really appreciate everyone's input and Boarder42 I wish we were disciplined enough to say we would invest the extra, but we are not. So it sounds good in theory however the 20 year is sort of a guaranteed savings method for us.

OP, sounds like having this debt making you uncomfortable is a good thing for you right now, since you say you're not disciplined enough to invest the extra. You said you didn't want to get into why you have this debt, ok. Your choice. Make sure that you're not going to screw yourself again in a year or as soon as you pay it off.

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #46 on: December 29, 2017, 05:55:30 PM »
Sounds like you have a spending problem and the mortgage doesn't really solve that.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #47 on: December 30, 2017, 11:50:27 AM »
Its not that we don't save, but if the mortgage is only $2000 we will only pay $2000. I would never overpay just because that is not how we are. However, we do both max out 401k and are looking to save more after debt is paid.

I guess I just do not want to think about having to put the extra away somewhere every month. Everyone is different.

boarder42

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Re: $65k in Debt, Refinance Mortgage
« Reply #48 on: December 30, 2017, 12:17:11 PM »
Its not that we don't save, but if the mortgage is only $2000 we will only pay $2000. I would never overpay just because that is not how we are. However, we do both max out 401k and are looking to save more after debt is paid.

I guess I just do not want to think about having to put the extra away somewhere every month. Everyone is different.

You don't have to think about it. You setup auto funding of IRAs which it sounds like youre missing and then taxable accounts.  There isn't any thought required this isn't an everyone is different scenario.

Broadway2019

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Re: $65k in Debt, Refinance Mortgage
« Reply #49 on: December 30, 2017, 12:21:36 PM »
Right now we are just focused on maxing out our 401ks. Once we settle the debt we will be investing in IRAs and other things. I have done some research but need to figure out what we would be eligible for since we both make $100k or more.