Author Topic: Should I do a cash back Refi?  (Read 2439 times)

COEE

  • Pencil Stache
  • ****
  • Posts: 612
Should I do a cash back Refi?
« on: June 28, 2017, 09:46:15 AM »
So I'm considering a cash-back refinance and would like to get a little help/feedback as the numbers are complex.

I currently have a 13%-41%-46% allocation of cash-stock/bond-house portfolio.  It seems to me that I have way too much tied up into my house do almost nothing for me (my house growth is the same regardless of amount of cash I have in the house).  I'm considering a cash back refi to get my house to be a smaller percentage of my NW.

If I were to refinance this would put me at a 13%-70%-17% which is much more palatable.  My primary purpose in doing this would be to invest more in the stock market (in a taxable account) and have more liquidity.

Current facts:
House value is $355k with just over $160k left on the mortgage
14 years of a 15 year mortgage @ 2.875%
15% tax bracket with a standard deduction.
Credit scores are around 800

Doing a cash-back refi at 80% equity would net me around $120k after fees and stuff.  I would want to stay with a 15 year mortgage so that I get the house paid off around the time I hit RE.  I have found through some searching a few companies still offering 2.875% with a 15 year term.  This would increase my payment by about $600/mo which would effect my ability to max out my retirement savings shelters based on my income - but I would have more liquidity to maximize those by just shifting money from my brokerage to my retirement account. 

One last factor - I was recently laid off (for about 2 months now) and I am looking hard for a job.  But having the cash would help us stay afloat in the event that I'm still unemployed for an additional 3 years or so.  I have a plan that should keep me afloat for the next 10 months.  I would probably hold the money in cash until I found a job.

Without a job will a lender even consider a cash back refi?  My wife makes some money from her job, but she's self employed and we are technically poor with just her income.  At the very least, I'm currently planning on selling the house next spring if I have still not found a job - but I'd obviously prefer to stay where I'm at.

What's the best solution here?

COEE

  • Pencil Stache
  • ****
  • Posts: 612
Re: Should I do a cash back Refi?
« Reply #1 on: June 28, 2017, 09:47:09 AM »
*Placeholder for additional requested details*

PapaBear

  • 5 O'Clock Shadow
  • *
  • Posts: 82
Re: Should I do a cash back Refi?
« Reply #2 on: June 28, 2017, 02:16:18 PM »
One last factor - I was recently laid off (for about 2 months now) and I am looking hard for a job.  But having the cash would help us stay afloat in the event that I'm still unemployed for an additional 3 years or so.  I have a plan that should keep me afloat for the next 10 months.  I would probably hold the money in cash until I found a job.

I guess that factor is the key factor to consider in your decision. Until your work situation is figured out, I would not do anything.
Holding money in cash is the right consideration while you are unemployed - however paying interest for it (your new mortgage at maybe 2.875%) while it sits there at maybe 0.5-1% makes absolutely no sense.

So figure out your work situation first and then reconsider increasing your stock/bond asset allocation. Additionally, before refinancing I would first consider reducing your cash part of the asset allocation (given that you are well settled in a new job, of course).

Papa bear

  • Handlebar Stache
  • *****
  • Posts: 1202
  • Location: Ohio
Re: Should I do a cash back Refi?
« Reply #3 on: June 28, 2017, 02:53:24 PM »
One last factor - I was recently laid off (for about 2 months now) and I am looking hard for a job.  But having the cash would help us stay afloat in the event that I'm still unemployed for an additional 3 years or so.  I have a plan that should keep me afloat for the next 10 months.  I would probably hold the money in cash until I found a job.

I guess that factor is the key factor to consider in your decision. Until your work situation is figured out, I would not do anything.
Holding money in cash is the right consideration while you are unemployed - however paying interest for it (your new mortgage at maybe 2.875%) while it sits there at maybe 0.5-1% makes absolutely no sense.

So figure out your work situation first and then reconsider increasing your stock/bond asset allocation. Additionally, before refinancing I would first consider reducing your cash part of the asset allocation (given that you are well settled in a new job, of course).

Great name, PapaBear! 



Sent from my iPhone using Tapatalk

Gone_Hiking

  • Stubble
  • **
  • Posts: 218
  • Location: Arizona
Re: Should I do a cash back Refi?
« Reply #4 on: June 28, 2017, 08:44:40 PM »
I'm siding with PapaBear as well.  Taking equity out of the house will not increase your stability.  Cash may be attractive, but adding to the debt, even at low APR, is not something to do in your situation.  Things will look much better once you regain employment.

COEE

  • Pencil Stache
  • ****
  • Posts: 612
Re: Should I do a cash back Refi?
« Reply #5 on: June 29, 2017, 08:58:45 AM »
Okay - so it seems that the opinion is to not do the refi right now.

However, how about when I secure a new job?

swaayze

  • 5 O'Clock Shadow
  • *
  • Posts: 5
  • Age: 52
  • Location: Fort Worth, TX
Re: Should I do a cash back Refi?
« Reply #6 on: June 29, 2017, 09:21:59 AM »
I seriously doubt anyone would make the loan anyway given your layoff. The time to get a heloc or cash-out is while you're still employed. If anyone else is considering this and fears their job will be elimated, then don't delay.

frugaliknowit

  • Handlebar Stache
  • *****
  • Posts: 1671
Re: Should I do a cash back Refi?
« Reply #7 on: June 29, 2017, 01:19:14 PM »
Even after you find a job, I wouldn't cash out to put that money in stocks.  Slow pay your mortgage is fine.  I'm just a bit more conservative I guess.

Once you have a job and know how much you will be making, hit us back.  Discussing that now is pointless.  Focus on getting your income re-established.  Best of luck:)