Author Topic: Refinancing Mortgage with Small Balance?  (Read 622 times)

ministashy

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Refinancing Mortgage with Small Balance?
« on: April 06, 2020, 04:06:06 AM »
Looking for some advice--I currently have a mortgage sitting at 4.81 percent interest, no other debts, and an excellent credit score, so I've become interested in refinancing now that mortgage rates have hit bottom (once the banks start taking applications again, anyway.)  However, I only have $34K left on a $105K mortgage, and my research indicates that most banks won't refinance for such a small amount.  The only way around that appears to be to do a cash-out refinance, then turn around and immediately apply that money to the balance ... has anyone ever done this?  Is it worth it, even for such a small balance, if I can lower my interest rate from 4.81 to somewhere around 3 or less?  All advice appreciated!

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  • Bristles
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Re: Refinancing Mortgage with Small Balance?
« Reply #1 on: April 06, 2020, 06:34:33 AM »
With a cash out refi you aren't going to get the best rate. Probably 1/4 to 1/3 of a point above the advertised prime rate. Also the closing costs are going be 1-3k. Assuming you can get 3.25% your are looking at saving $530 a year in interest.

affordablehousing

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Re: Refinancing Mortgage with Small Balance?
« Reply #2 on: April 06, 2020, 01:37:12 PM »
Not worth the trouble. You're better off for your time filling out surveys online.

ministashy

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Re: Refinancing Mortgage with Small Balance?
« Reply #3 on: April 09, 2020, 02:32:10 AM »
Thanks for the replies--I wasn't sure if the math worked out, so I'm glad I got some second opinions.

secondcor521

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Re: Refinancing Mortgage with Small Balance?
« Reply #4 on: April 11, 2020, 10:49:36 PM »
Another option is to get a HELOC and then use the HELOC to pay off the mortgage.  Usually HELOCs have low closing costs and you could probably get one large enough to cover the $34K balance on your first.  You're probably not going to get as good of an interest rate, but you still might be able to shave off one percentage point or so.

A risky option which would only be suitable for someone with very high discipline, a high cash flow, a high risk tolerance, and a secure job, would be to move it to a zero percent credit card and then pay it off over the next year.

SwordGuy

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Re: Refinancing Mortgage with Small Balance?
« Reply #5 on: April 12, 2020, 11:30:17 AM »
Another option is to get a HELOC and then use the HELOC to pay off the mortgage.  Usually HELOCs have low closing costs and you could probably get one large enough to cover the $34K balance on your first.  You're probably not going to get as good of an interest rate, but you still might be able to shave off one percentage point or so.

A risky option which would only be suitable for someone with very high discipline, a high cash flow, a high risk tolerance, and a secure job, would be to move it to a zero percent credit card and then pay it off over the next year.

Why is that extra risky?   The house is now paid off and you usually can't get your house taken away because you declare bankruptcy and can't pay off a credit card.  Right?

Risky in the sense of paying it off plus lots of interest if you don't finish paying it off in time, yes.

secondcor521

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Re: Refinancing Mortgage with Small Balance?
« Reply #6 on: April 12, 2020, 04:18:46 PM »
Another option is to get a HELOC and then use the HELOC to pay off the mortgage.  Usually HELOCs have low closing costs and you could probably get one large enough to cover the $34K balance on your first.  You're probably not going to get as good of an interest rate, but you still might be able to shave off one percentage point or so.

A risky option which would only be suitable for someone with very high discipline, a high cash flow, a high risk tolerance, and a secure job, would be to move it to a zero percent credit card and then pay it off over the next year.

Why is that extra risky?   The house is now paid off and you usually can't get your house taken away because you declare bankruptcy and can't pay off a credit card.  Right?

Risky in the sense of paying it off plus lots of interest if you don't finish paying it off in time, yes.

I wrote "risky", not "extra risky".

It's risky in the sense that you might end up either paying a lot more interest than you would have had you not refinanced if you end up not being able to pay it off within the 0% period or can't find another 0% card to move it to.  (Having a paid off house and a bankruptcy isn't a great situation to be in either, but that's not what I was thinking about.)

If you have enough cash flow to pay it off in a year or so and just pay off the original mortgage early, you're not really paying that much in interest.  And I know that 0% no-balance-transfer-fee cards are out there, but I also know that 2% or 3% BT fee cards are more common, so paying that 2% or 3% to get a nominal 0% doesn't really save you much.  It does save you some, which is why I mentioned it as an option.  But I also think people should, in general, consider the drawbacks of any plan along with the benefits.