Author Topic: Refinance and pay off half of mortgage by 12/20 or sell and move?  (Read 1234 times)

ebella

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So I'm in a career /life transition which you can find more details about in a previous post of mine.
I owe $201,000 on a 1 bed/ba condo I bought last year for $257,000 (it's probably worth at least $280,000 based on comps last month in our bldg). 
Current monthly mortgage, escrow, HOA is $1700. 
I recently got married and my husband's family wants to give us $100,000 to help pay it or as a downpayment on another property.  I
I also recently learned from my mortgage lender that, if I make a refi application by 12/20 they will waive lender fees, meaning we only pay for the underwriting to add my husband to it, title and recording (around $2000 in refi costs). 
Refi will get me from a 4.85 to a 3.9% interest rate regardless.
If we also pay off $100,000 it will drop our annual housing costs to $1000 (mortgage, escrow, taxes, HOA). 
I also a left my job this month and am in the process of searching for a new job (you can read more about that in another post of mine).  I was earning $150,000 and do not expect to earn that much going forward as I'm looking at doing political work for 2020 or doing public interest law.  I currently can do fulltime work I love for the 2020 election but we are waiting on funding for it from our parent org so it may is unpaid.  I have $38,000 in my emergency fund and $68,000 in student loans with 2.8 % interest.  I've been paying $2000 a month but can reduce that to around $2000.  My family also has offered to use stock to help me pay it.  This is the only debt we have other than mortgage.
My husband's annual income is $43,000 right now and, if we do this refi and pay off $100,000, we can use that to pay for our mortgage/living expenses and my savings for the student loans.
My husband and I don't love the city/neighborhood where we currently live i.e. we do not want to stay here for 5 years.  We much prefer D.C. where we could live for free in my Dad's apartment (which he doesn't live in, is fully furnished, and willed to me).  But husband doesn't want to sell and move until I have fulltime work in D.C.  I'm still being considered for 2 of my dream jobs there but may not know for sure until after 12/20.  I'm also being considered for 2 other paid dream jobs where we currently live.
If we sold our place now, we'd be able to pay off my student loans but we would incur some capital gains tax. 
If we refinance by 12/20 we'll make up the $2000 refi costs in less than 5 months and, if we sell after 7 months, we'll have no capital gains tax.
Can anyone help me walk through these numbers and give me some insight?  It's alot going on and I don't want to be throwing more money into this place if we're going to move eventually.  On the other hand, I also want to take advantage of lower interest rates and reduce our monthly expenses so that I can do work I love and not be worried about money.  Is there anything I'm missing or have failed to consider?  What would you do?
« Last Edit: December 12, 2019, 08:26:27 AM by ebella »

SwordGuy

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #1 on: December 12, 2019, 12:27:17 PM »
You may or may not have a paying job for some time.

You may be moving relatively soon to another city, but there's no guarantee that your house will sell when you move.  If it doesn't, you'll have additional moving expenses and TWO sets of living quarters to pay for instead of just one.  Plus, after you move, it might take awhile for your partner to find a job in the new city.

Did I understand the situation correctly?

If I did, you should NOT put that money in the house.  Why?  Because your partner's income will not cover your monthly expenses if you don't have a job and that's even BEFORE you have to cover moving expenses and may double your housing and utility expenses!  Money that's locked up in your household equity is not helpful to you in that situation.

You need to either reduce monthly expenses OR beef up your liquid assets to draw down OR secure your own adequate income stream.    Paying 1/2 of your mortgage and refinancing only cuts your expenses by $1k, which is still not enough to cover your expenses on just your partner's salary.

If you pay off your student loans you'll have cut your monthly expenses by $2k.  That's a big deal.   Plus you'll have a an additional cash buffer.   

If you take a long time to get a paying job that will be very useful.  Ditto for deposits and moving expenses while you relocate.
You can always pump the leftover money into the house if you stay or use it for a down payment on a new place.   Without the student loans on your back you'll easily be able to pay down the mortgage faster if you want to.

Put personally, after the job and city-of-residence uncertainty is over, I would put that extra into the stock market in low fee index funds. 

It also wouldn't cost much in additional interest to hold off a few months before committing the money (assuming you don't fritter it away on other things).

PS -- I didn't bother to track down your back story, but for anyone else reading this, it's best to find the new paying job and then quit the old one.

partgypsy

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #2 on: December 12, 2019, 01:07:41 PM »
yes you didn't say what your interest for your student loans were and whether they were forgivable. If they are not I would pay off student loans.

I would focus on getting paid work for the next year until you hear about your various dream jobs in 2020. Depending on your comfort level, you are pretty sure you are not staying in area, go ahead and sell condo since prices are high now and then rent for next year (doesn't sound like you are particularly attached to are or condo itself). You can decide the rest in a year when have permanent job, and you won't have stress of both changing jobs and selling house at same time.
« Last Edit: December 12, 2019, 01:09:42 PM by partgypsy »

ebella

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #3 on: December 12, 2019, 05:52:22 PM »
My previous post answers all the questions and I explicitly said my student loan interest rate is 2.8% in this post. (it's variable and private bc lol loan forgiveness)  But to clarify:
1) I was fired; I am not just leaving my job without a new one. 
2) Our monthly expenses (not including my student loans) are less than $3000.  We can live on my husband's salary whether or not we refi.  I would use my savings to continue to pay my loans and I can choose to reduce them to $1000 or lower. My grandmother also has offered to pay them for me. WE ARE NOT RELYING ON HUSBAND'S SALARY FOR MY STUDENT DEBT! 
3)  My partner can find a job in D.C. immediately but he doesn't want to put out feelers yet because it will alert his current employer here who would fire him (it's a very insular industry)
4)  There will be no deposits or moving costs if we move.  We're moving into a family home that's fully furnished.  We'd sell most of our furniture and rent a small van for our personal items like clothes, bikes, records.
5)  We are not allowed to invest the 100k or use it for my student loans.  My husband's family have told us we must use it for a downpayment or to pay off mortgage on a home we live in.
6)  We do not own a house.  We own a condo.  Both our neighbors sold their units in the last 2 months.  One that is slight bigger sold for $290,000, one that is half our size sold for $188000  I am not worried about whether it will sell if the economy stays the same.
7) I am focusing on getting paying work.  I literally interviewed today and will interview again next week.  I'm waiting to hear back from 3 other paid jobs I've interviewed for.  But, if I don't, obviously refinancing allows us to reduce our monthly expenses.
TL/DR:  Our mortgage interest and balance is our largest debt.  If we refi and pay some off, it will still be our largest but will be reduced from $202,000 at 4.85% to $102,000 at 3.99%.  My student debt is $68,000 at 2.85% and unlikely to go up unless Fed raises interest rates.

six-car-habit

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #4 on: December 12, 2019, 09:33:04 PM »


 I am going to assume you are allowed to use the 100K to pay the balance down on your current condo .
 
 Pretty sweet situation, with the gifts from in laws, grandma, and family all available...

 If your husband can find a job immediatley in D.C. as you say, and you have a free place to live there, who cares if his current employer finds out ?

  Why not put the $100K towards principal on the condo. Dont bother with the re-fi.  Have husband start looking for DC work. Take the money from grandma to cover your loan payments or the family selling stock and gifting you the money.  Then move to DC . Sell the condo. Use the Condo profits to pay off the remainder of your loans, and put balance of the money into emergency fund or such.

cchrissyy

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #5 on: December 12, 2019, 10:19:51 PM »
I wouldn't rush into the refinance or into paying down the mortgage. you have too many factors all up in the air at the same time. If your family will allow it, I think you should put the 100k in a safe place for short to medium term savings and then, when all these questions clear up, you will know what to do with it. Try not to be distracted by this offer to hurry up and refi this week, with or without putting money in. it's just not enough benefit, mostly it's a distraction from all the open issues you have to decide first and it might be a real mistake.

ebella

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #6 on: December 13, 2019, 09:24:53 AM »
Try not to be distracted by this offer to hurry up and refi this week, with or without putting money in. it's just not enough benefit, mostly it's a distraction from all the open issues you have to decide first and it might be a real mistake.

When you say "real mistake"  what do you mean?  Like is there a scenario in which this would be a really disastrous financial idea?

acepedro45

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #7 on: December 13, 2019, 09:42:03 AM »
Quote
When you say "real mistake"  what do you mean?  Like is there a scenario in which this would be a really disastrous financial idea?

Yes...if she relocates because of her job and has to sell the condo. Then the upfront fixed cost of the refi (discounted or not) is largely squandered, because she won't own her place long enough to recoup the money.

frugaliknowit

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #8 on: December 13, 2019, 12:03:51 PM »
I wouldn't rush into the refinance or into paying down the mortgage. you have too many factors all up in the air at the same time. If your family will allow it, I think you should put the 100k in a safe place for short to medium term savings and then, when all these questions clear up, you will know what to do with it. Try not to be distracted by this offer to hurry up and refi this week, with or without putting money in. it's just not enough benefit, mostly it's a distraction from all the open issues you have to decide first and it might be a real mistake.

+1

My $.02:  Owning property with a significant mortgage is for when you have STEADY WORK.
You have all of these conflicting "maybes" going in all different directions.  Decide on your priorities, first.  If the priorities involve stable, appropriate income NOW, then own.  I would only buy on the basis of the in-law gift if, per above, my husband and I agree that owning aligns with our priorities.  Personally, I would not co-own a property I already own with a spouse or significant other (I think it's best to "start fresh" TOGETHER).

ebella

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #9 on: December 13, 2019, 09:51:22 PM »
I wouldn't rush into the refinance or into paying down the mortgage. you have too many factors all up in the air at the same time. If your family will allow it, I think you should put the 100k in a safe place for short to medium term savings and then, when all these questions clear up, you will know what to do with it. Try not to be distracted by this offer to hurry up and refi this week, with or without putting money in. it's just not enough benefit, mostly it's a distraction from all the open issues you have to decide first and it might be a real mistake.

+1

My $.02:  Owning property with a significant mortgage is for when you have STEADY WORK.
You have all of these conflicting "maybes" going in all different directions.  Decide on your priorities, first.  If the priorities involve stable, appropriate income NOW, then own.  I would only buy on the basis of the in-law gift if, per above, my husband and I agree that owning aligns with our priorities.  Personally, I would not co-own a property I already own with a spouse or significant other (I think it's best to "start fresh" TOGETHER).

I'm not sure you understand; we're not buying. We already own. I bought the property before we were married when I had steady work with the expectation that it would continue. Obviously, stable income continues to be our priority. He'd be on the deed and mortgage if we refi and he puts money into the mortgage.

partgypsy

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #10 on: December 18, 2019, 11:44:59 AM »
What people are saying since refinancing usually costs money as well as ties you to a place and ties up your money (not great if planning on relocating) it may not be optimal to refinance.
Try this calculator. There are other calculators as well (bankrate).
https://www.zillow.com/mortgage-calculator/refinance-calculator/

Obviously, if the monetary gift has strings attached, that you have to use it on the condo and nothing else, then well refinance and be done with it.

I think what others are hinting at, is your decision to leave a 150K job and possibly take completely unpaid work for the next year has a bigger impact on your finances than the interest rate differences you speak of. You are also asking us to give us an opinon whether to refinance or sell (move), when you a) don't know what your job will be b) what your husband's job will be and where it will be.  That's not a monetary decision, that's a life decision.
« Last Edit: December 18, 2019, 02:31:51 PM by partgypsy »

ebella

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Re: Refinance and pay off half of mortgage by 12/20 or sell and move?
« Reply #11 on: December 19, 2019, 09:45:23 AM »

I think what others are hinting at, is your decision to leave a 150K job and possibly take completely unpaid work for the next year has a bigger impact on your finances than the interest rate differences you speak of. You are also asking us to give us an opinon whether to refinance or sell (move), when you a) don't know what your job will be b) what your husband's job will be and where it will be.  That's not a monetary decision, that's a life decision.

Again, leaving the $150,000 job was not my decision.  And my goal is not to do completely unpaid work.  My goals is to not practice law with a law firm that defends clients who actively violate minority civil rights.  My goal is to practice law that defends peoples' rights and one immediate option for doing that is unpaid work. 

However, as it turns out, I got 3 offers this week, all paid, with 401k and health etc in my current location and 2 of which defend civil rights.  One is my dream job for $110,000  base pay (asked them to increase base salary and waiting to hear back) but it comes with bonuses based on receivables), the other is similar to previous position (minus suppression of civil rights) for $140,000 (and doesn't align with my long term career goals but also has bonus potential) and the other is for $60,000-$70,000 (no bonus potential bc govt work) and is closer to my interests but not where I want to be long term.  I'm taking the dream job even if they don't increase the base salary because I believe it makes sense in terms of my overall life goals and I can recoup the difference in bonuses and increased earning potential over time. 

And I'm refinancing the mortgage!  And possibly my student debt too.  At the lower interest rates. Best Christmas present EVER!