Warning, long post, but a lot of details to cover...hopefully I made it a fairly easy read.
A quick background of my current financial situation:
-$75k annual income -Purchased my home 5 years ago for $108k. Took out a $102k 30yr fixed mortgage on it at 4.375% rate. Monthly payment of $870 including escrow and PMI. -Currently sitting on ~$94k balance on the mortgage. -Pretty much debt free otherwise except for two auto loans, one just under $3k and one under $8k.
Looking at refinancing due to low interest rates currently and debating if I should take out extra cash and pay off the cars with it.
I talked to my bank and because of the volume of refi loans they're doing, they're not even doing appraisals in most cases, so they valued my home at $160k based on surrounding home values.
Option #1: They gave me a quote to refi $120k (75% of value) at 3.675% and $2300 closing costs. Still 30yr fixed. This would reduce my monthly payment from $870 to $818, (PMI removed) and with closing rolled into the mortgage, I would walk away with about $22k in cash. I would pay off the cars and be debt free except for the mortgage and in the process, would end up freeing up close to $500/month in cash flow. That on top of the left over $10k or so from the refi would go into savings as well as a good bit put back into sweat equity in the house for some updating and needed repairs.
Option #2: I could do a straight refi with no cash out at 3.25%. this would obviously remove PMI and reduce my monthly payment to $670. Pretty simple, frees up about $200/month in cash flow, but doesn't pay off the cars or fund repairs or anything.
Option #3: Haven't gotten any numbers on this yet, but either split the different and just take out $11-12k in cash to just pay off the cars and use the cash flow for repairs. OR just take out enough to pay off the $3k car loan which would free up $225/month by itself, not counting the monthly mortgage savings.
This isn't our forever home, but likely our home for the next 3-5 years and is in need of some pretty major updating...nothing is broken yet, but has about a 20 year old roof, 30 year old furnace, and 20 year old AC...basically I'm on borrowed time.
My main focus is since the value of the home has increased so much, to increase monthly cash flow and get the house truly up into that estimated value ballpark. But the thing holding us back is mainly, is the housing market going to tank again and what happens if it does? Will I be sitting on a $120k mortgage and a $100k house? If I'm being honest, that's more of my wife's worry than mine, but can't make this decision alone, ya know? Thoughts on what route I should take? Thank you in advance if you've read all this!
TL;DR: would like to take cash equity out during refi to do some soon-to-be-necessary upgrades/repairs and increase cash flow, but worried about overdoing it if the housing market tanks again. Scenarios detailed above.
Submitted July 31, 2020 at 10:40PM by MiniBeast9706 https://ift.tt/33bipCh
