I'm refinancing right now with PenFed to a 5/5 ARM. We don't plan on living here longer than 2-3 yrs as we plan to build on the 3 acre lot we bought in January. Assuming lenders even do cash out anymore, should I try asking for it from PenFed and then use that money to pay down my lot loan?
Here's the numbers...
Current Mortgage:
13 years left on a 15 yr fixed at 4.25%
Remaining balance of $75k
Appraised at $130k 2 yrs ago for the last refi (so I'm expecting the appraisal done last week to be at least that much since I've remodeled the entire kitchen, added a deck, and replaced half the windows since then)
New Mortgage:
30 year 5/5 ARM at 2.75% (w/zero closing costs)
Lot Loan:
2 yrs and 3 months left on a 3 yr balloon loan at 4.5%
Remaining balance of $65k
Payment is $650/mo, but I pay $2500/mo so that by the time the balloon hits there is no remaining balance
Assuming they allow a max 75% LTV, I could get $22500 (or more if the appraisal comes back higher than the $130k figure). To me it almost seems like a no-brainer. Use money borrowed at 2.75% to pay down money borrowed at 4.5%, duh! I'm just hoping for a second pair of eyes to take a look and see if they come to the same conclusion or if I'm forgetting anything in my calculations. Obviously the $22500 won't pay off the lot loan completely, but it does get me closer so it still makes sense to do this, right?