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Profile picture for eppacker

Does my plan make sense, trying to refinance 15 yr fixed to a cash out refi?

current balance 127k @ 6%
paid 13 out of 15 yr
home appraised @ 186k
looking for new refinance amout, fees included, @ 145k...does it make sense to refi? eextra cash to consolidate all existing bills.
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November 16 2010 - US
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Answers (13)

Again, I agree with Chris. There is nowhere else you could borrow this money to pay off your debt this cheaply.

You will lose two years of amortization at 6%. The advantage of the lower rate, regardless if cash-out or rate & term is worth it. The monthly savings on your consumer debt, if a portion is applied to the new loan, will make up for that in time.

Happy funding, Rudi
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November 17 2010

It makes sense.  Get it done. 

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November 16 2010
Profile picture for eppacker
sorry big mistake...paid only 2 years out of 15...13 years to go...
new loan: 15yr, $145k, 3.91%
plan on staying in this home for a while.
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November 16 2010
eppacker,

I agree with Chris. Your information doesn't add up.

With a $1,185 per month mortgage payment there is no way that small amount will pay off $127,000 in two years.

Happy funding, Rudi
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November 16 2010
Profile picture for the_country_hick
You have 2 years left before your house is paid off so as long as you pay taxes you can not lose it.

If you refinance you place your house in jeopardy if something goes wrong and you can not make the payments 6 years from now. That could potentially cost you the house.

Financially you may save money refinancing. But is it worth the risk?

Instead I would go to a bank and try to refinance those other loans at a lower rate and not risk your house. If you can get a mortgage have you looked at other loans for this?  I would prefer a smaller amount being paid off each month compared to risking losing my house.
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November 16 2010
I would suggest doing this if you were to follow a strict routine to eliminate the extra "cash-out" amount on yourt mortgage. You can simply use the mortgage as a tool to pay off high rate interest credit cards in a low rate, tax dedectable mortgage by simply paying the same payment you would pay on your credit cards as an additonal payment to your principle every month on the new loan until the "cash out" amount is elminated.  
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November 16 2010
I would consider it if you were willing to pay extra on your mortgage.  As others have said you don't want to finance credit cards etc over 15 years.  You could pay continue to pay the same payments on the extra debt that you are currently paying at 10% and reduce it down to under 4% and obviously you would save 6%.  So you could factor out how much you would pay in interest at 10% over the term you plan on paying it off and compare that to paying it off witht he lower rate on the mortgage.  Then calculate how much  the slightly higher rate for the cash out would cost you over the term of your loan and see which way you will pay less interest.
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November 16 2010
It is good to refinance or cash out refinancing.
Assume you pay the new mortgage and the outstanding debt in 154 months as same as your remain payments on the currently mortgage.
The total payment for non cash out is $188,884 (new mortgage $130K at 3.75% + outstanding debt at 10%)
The total payment for cash out $144K at 3.91% is $184,640. ($127K + $3K closing cost + $14K  outstanding debt)
It is $207,316 for 'don't do any thing' (old mortgage $127K at 6% + outstanding debt at 10%).
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November 16 2010
Here is where my confusion lies.  You have a 15 yr that you have paid for 13 years and still owe 127?   
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November 16 2010
Profile picture for eppacker
more information...current payment is 1185 15yr fixed @ 6%...new loan would be 145k @ 3.91 for 15 yr fixed...outstanding debt 14k roughly @ 10% interest....any amount saved will be added to new mortgage
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November 16 2010
Profile picture for wetdawgs
It doesn't make sense to use the house as a piggy bank to pay outstanding bills.  Why?  Do you really wish to finance a pizza for the next 30 years, or your car, or trip to Europe?
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November 16 2010
I want to make sure we have the correct information before making a recommendation.  Was you original mortgage loan 15 yr or a 30 yr fixed?  How much debt or bills?  Is it credit card debt?  If so, what interest rate?  What is the minimum payment due?  Are you paying extra towards the bills?  What is your current principal and interest mortgage payment?   
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November 16 2010
It doesn't make sense to refi to pay off credit cards since you are incurring closing costs. Also you would be paying off the bills in 15 years. It only makes sense to refi if you are saving money.
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November 16 2010
 
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