Everyone in this forum gives really helpful sensible advice. I've never done a refi before so thanks in advance for anyone who takes the time to offer an opinion.
Ok, so I'm thinking of taking advantage of the recent slight dip in mortgage rates to refinance--something that we have planned to do this fall for a while now. The decision to refinance seems like a no-brainer, right?, because my monthly payment would remain constant but I would cut my interest rate by over 2% and pay the house off 4 years earlier, but I'm wondering if I should take the opportunity for cash out for a (necessary! see below) renovation at a higher rate, but obviously much lower than any other loan for a remodel.
Current Loan Info
Interest rate: 5.00%
Term: 30 yr fixed
House purchased for $179,900, loan amount of $143,920 (20% down)
Home value: 9/13 appraised at $185k. I estimate it will appraise for at least $230k now (market values have skyrocketed in my neighborhood)
Current balance: $137,841
Monthly payment (mortgage/interest only): $773 but I currently pay an additional $170 to principal with no penalty (scheduled to pay off the house in 19 years timed to coincide with retirement)
Refi Info if I don't cash out:
Interest rate: 2.875%
Term: 15 year fixed
Monthly payment: $944 (1$ more than I currently pay comfortably)
Appraisal paid by lender credit. No origination fee. $1318 title fee.
Refi with $30k cash out:
Interest rate: 3.75%
Term: 20 year fixed
Monthly payment:$995
Lender credit of $3k to cover appraisal and title fees + escrow. Assuming my appraisal estimate is not way off, we would still have a loan to value ratio of about 73% (I don't want to go near 80%).
Why I'm Tempted:
The second story (which has our guest room) is inaccessible to most people (super steep and narrow, very uneven dangerous stairs) and so it is all but unusable. When we bought this house, we did it with the intention of replacing the stairs, which entails wall removal and relocating them because currently the run of the stairs won't fit in its current location if we bring it to code. We'd also like to add a second bathroom up there. All of what we plan should increase the home resale value enough that we gain most of what we put in back, and it will substantially increase our comfort and happiness (my aging parents can visit!).If we don't do the renovation through a loan of some sort, it will take me about 6 years to save enough to pay the cost outright because we are prioritizing tax-advantaged retirement savings.
Face punches, anyone? Am I thinking about this all wrong?