Author Topic: Refinance or Refinance and Cash Out (or neither)?  (Read 555 times)

Eurotexan

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Refinance or Refinance and Cash Out (or neither)?
« on: August 11, 2019, 06:58:59 PM »
I am on the fence about whether to refinance and cash out and would love some advice. A ffew facts:

I have a balance on my mortgage of $70K at 4.25% for a 15 year. Last year I aggressively paid extra towards my mortgage which I now regret (thanks to some great information on these forums). I can refinance at 3.75% or refinance with $100K cash out at 3.99%. Both rates are an improvement on what Iím currently paying. My current monthly payment for P&I is $1100 and fees for the refinance are at about $1000.

The main driver for refinancing is Iím unhappy in my job. I am only 3 years away from FIRE but I donít think my mental health can wait that long. I have a pretty good stash in my tax deferred accounts but not enough in taxable and savings to be able to take a mini year long FIRE to recharge my batteries. Refinancing would significantly lower my mortgage payment and therefore my monthly expenses. Refinancing and cash out would still reduce my payments and give me cash now.

I am hesitant  for a few reasons

With such a small balance does it even make sense to refinance?
With a cash out it wouldnít make sense to put it in the market as I may need it short term. Does it make sense to pay 4% for money which will be sitting in a savings account earning 2% just for peace of mind?

I currently have about $70K in my brokerage and savings. I could live for 2 years on that but Iím nervous. The plan was never to leave work now, I just need to put my mental health first.

I welcome all comments and suggestions.

MoneyMatrix

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Re: Refinance or Refinance and Cash Out (or neither)?
« Reply #1 on: August 11, 2019, 08:17:33 PM »
Just a couple thoughts.  $1000 for the refi cost seems really low, are you including all of the costs? Are some of the costs rolled into the new mortgage?

You might also check what you are paying in principal for the current loan vs what you would be paying for the new loan. It seems like the extra payment you are making for the 15 year might be a lot of principal.

I realize you are looking for a way out of a bad job but overall over time you'll be paying much more interest if you refi into a 30 yr loan. Just something to consider.

Can you find another, less stressful job, even if it pays less?

As I said, just some things to consider.

A Fella from Stella

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Re: Refinance or Refinance and Cash Out (or neither)?
« Reply #2 on: August 12, 2019, 06:38:25 AM »
How much time is left on he life of the original mortgage?

Are you refinancing to a 15, 10, 5????

fuzzy math

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Re: Refinance or Refinance and Cash Out (or neither)?
« Reply #3 on: August 12, 2019, 06:51:56 AM »
Those rates you are quoting are really high. Have you shopped around at all or is this your current bank's rate?

Eurotexan

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Re: Refinance or Refinance and Cash Out (or neither)?
« Reply #4 on: August 12, 2019, 06:54:17 AM »
I have 5 years left if I continue to pay my current mortgage as is

I am looking at refinancing to a 30 year

I was off on the fees, it is $1550

I have contacted 2 mortgage brokers and this is the best I have gotten so far. The fees are pretty low so maybe that is built into the rate?

A Fella from Stella

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Re: Refinance or Refinance and Cash Out (or neither)?
« Reply #5 on: August 12, 2019, 11:07:01 AM »
I have 5 years left if I continue to pay my current mortgage as is

I am looking at refinancing to a 30 year

I was off on the fees, it is $1550

I have contacted 2 mortgage brokers and this is the best I have gotten so far. The fees are pretty low so maybe that is built into the rate?

You must be so miserable at your job. I sometimes think of just quitting my job. In fact, a college called and asked if I could teach 2 daytime classes for $8,000 for the semester. The idea is so attractive, but I know I have to wait.

What are the upsides of having NO MORTGAGE in 2024 (how old will you be?)? I have to imagine they outweigh the benefits of borrowing against your house. What if the fund you put the money in cuts in half the first couple years?

How will you make it work if you take the money out on a 30 year mortgage?

Bobberth

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Re: Refinance or Refinance and Cash Out (or neither)?
« Reply #6 on: August 13, 2019, 02:42:44 PM »
It sounds to me that you don't have a specific plan for the $100k if you do the cash out, correct? If you don't need the money now but at some point in the future you may like to have access to your equity, that sounds exactly like a HELOC. The HELOC rate will be higher than the refinance rate but you're not going to have to pay interest when you aren't using the money and you will have a slightly lower rate on your regular mortgage.

Are you sure that taking on debt would get you closer to FIRE though?

Eurotexan

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Re: Refinance or Refinance and Cash Out (or neither)?
« Reply #7 on: August 13, 2019, 05:28:32 PM »
Thank you all for your thoughtful responses. I am leaning towards just the refinance. It gives me an even lower interest rate and I can save the monthly mortgage savings. I have come to realize that fear of not having enough savings is potentially pushing me to more debt which is not the right course for me.