Is it a good idea to refinance in this situation?

I currently have a loan on my house for about $100,000 with an interest rate of 6.25.
My current home is now worth at least $180,000 if not even more.
I have around $25,000 in credit card debt at about 18% interest.

Just to work with some number let's say I cash out refinance in this conservative way.
$25,000 cash out and my interest went down to 5% fixed.
Pay off the Credit Cards in full.

Can someone help me with the math?
Is this the right thing to do?
How much can I expect to pay for this loan?
Or should I do a line of credit?

Please help me.

Thanks
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November 15 2013 - Oakland
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Answers (11)

Vid
You need to quit doing research and start doing a refinance. Justin Sheftell couldn't be more highly recommended. I have followed his commentaries on Zillow, for a couple of years now, and he is solid as a rock. Contact him, and he'll take all the thinking, about this subject, off your mind, and into his. Shop his offerings if you're inclined to, but I'd wager you will not find a more professional Loan Officer, to help you improve your financial position. You could waste a huge opportunity by over-thinking that turns to procrastinating. There are four, or five ways, to better your situation and Mr Sheftell will pinpoint the best one in hours, if not minutes.
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November 17 2013
"Do I have to wait tell 2014 to roll around so that I can show some projected income for 2013?
Also just speaking from a numbers perspective how much would my taxes need to be in order to qualify for the $125,000 refinance. I just need a ball park"

Hi Vid,

In response to your additional questions - to use your 2013 income, you'll need to file your returns, so the timeline would be early 2014 after you've filed.

As far as numbers go, assuming you have no other debts or recurring obligations (child support, etc) after the refinance, please keep in mind that this is a "ballpark" figure, and I'd need to fully evaluate your credit, income, and all obligations.  With that said, a ballpark number for adjusted gross income would need to be at least $23,000.  But keep in mind that there are factors within your tax returns, like depreciation, possible non-taxable income, etc., which can change the numbers.  

I hope this info is helpful.  Please contact me to discuss further.  As I mentioned, I am a California lender.  Good luck.
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November 17 2013
If you are self employed then it is possible to qualify for solid financing using only the 2012 return. Tough to say how much income you would need it would depend on your full existing liabilities that remain after closing, also if your qualifying numbers are tight be prepared to have to close the credit accounts in exchange for paying them through closing. If you have uncertain income that fluctuates year to year then quite likely a 30 year fixed will be the best choice so you can keep your minimum expense as low as possible and pay extra when your budget allows.
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November 17 2013

Wow thanks for all the great advise guys. Here is another question for you. My 2012 and 2010 is pretty good but my 2011 tax year wasn't very good at all. Do I have to wait tell 2014 to roll around so that I can show some projected income for 2013?
Also just speaking from a numbers perspective how much would my taxes need to be in order to qualify for the $125,000 refinance. I just need a ball park to see if it's worth my time to move forward on this now or wait. Just a heads up if you are just going to tell me to call you in order to know that then you might not get a call. Sorry but I do most of my research at night. But if you can help me figure out if it's possible you might just get a call very soon. :)

Thank you again in advance.

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November 16 2013
It would take more of your financial information to give you a 100% guarantee that a refinance would be wise, but as of what you are saying at this moment with that interest rate it would be advantageous for you to refinance. I recommend that you speak with a lender directly about your situation. There are lenders like myself that would be glad to speak with you to help you get the loan that you need. Well I hope this helps!

Good Luck!
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November 15 2013
Hi Vid,

Your situation is a definite opportunity for you to improve your finances.  

You can lower your interest rate on your home, while also eliminating all of your credit card debt.  The result will be better monthly cash flow, and having one payment to make rather than many, not to mention the potential tax advantages.

It would not make much sense to do a line of credit, since your present interest rate is higher than current rates.  That would only make sense if you had a rate on your first mortgage that was very low and you didn't want to lose that rate by refinancing.

Closing costs could vary by lender, and can be paid at closing, rolled into the loan, or paid by the lender.  There are different options that can all be easily explained in detail.

I'm a California lender.  Please contact me, and I'll be happy to give you all of the advice you need and provide you with detailed quotes today.
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November 15 2013
Agree. Just do it. Another benefit is you cannot currently write off the credit card interest you are paying. You can write off mortgage interest so you'll be getting a bit extra back come tax time assuming you itemize and write the interest off.
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November 15 2013
No-brainer. With your current Mortgage rate, and the ridiculous credit card rates, you need to do something. In my humble, opinion you can't lose. 15 or 30, you're going to win. Refi today! The 25% reduction in your mortgage rate will dam near pay the credit cards off for free. If you match the new loan term to your remaining term on current mortgage, you'll come out way ahead. You got to stop thinking about this, and Nike slogan this deal.

JUST DO IT!
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November 15 2013
If you are making only the minimum payments on the credit card debt, then it will take you a really long time to pay it off and an enormous amount of interest.  Look at what you monthly payments are in total currently, then determine whether you can afford the same, more or less.  That will help you decide on which term mortgage to take out.  You can do a 10 year, 15 year, 20 year 25 year or 30 year.  The shorter the term, the higher the payment, but less interest paid over the duration of the loan.  The longer the term, the lower the payment and the more interest over the the life of the loan.  In any case, you will save a lot of money in interest that you currently throwing away to the credit card companies and consolidate your debt into a more manageable monthly payment.
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November 15 2013

Prior commenter is correct. 125k @ 15 years is approx. $900 per month w/o taxes or insurance. Or you could do 125k @ 30 years for approx. $600 per month. A cash out refi would likely be less expensive long term than a line of credit...but talk to a lender to get specific comparisons-one that does both cash out refis and one that also offers a Home Equity line of Credit.
Your interest should be lower on a cash out refi that your current rate of 6.25%-I personally see no down side to either refinancing or doing a HELOC-be sure to get actual comparisons from a lender so you can make an informed choice.

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November 15 2013
A new 15 year with $25K cash out would have a principal & interest payment of aprx $900/month. What is your current principal & Interest payment and how many years left on your loan?
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November 15 2013
 
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