refinance mortgage????

bill_hApril 16, 2006

we have a house valued at 124k, we owe 60k on it, at 4.75 rate. we are thinking of refinacing that 60k we would put 20k down on the refinance, leaving us with a 40k mortgage. why you ask. my wife will be forced out of her job, within the next yr to yr and a half, cutting our income, and we are thinking this would be a good way to lower the house payment, to free up extra cash when this happens. pros?? cons?? other than a higher interest rt, we dont see any major downside to this. am i missing any??

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I'm no expert but I've refinanced a few times and never for a higher rate or longer term. One of the prinicples that guides my financial decisions is whether or not what I'm doing increases my net worth. Paying more interest and less principle on a mortgage doesn't. We have had a couple situations where DH has not been working and the first thing we have done is cut all non-essential spending. Fortunately we've never had to refinance a mortgage to cut our expenses.

Is it not possible for your wife to find a new job in the next year and not cut her income?

    Bookmark   April 16, 2006 at 10:01AM
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That's not going to lower your payment by very much -- less than $100/month, right? And that's not counting the fees involved in refinancing.

    Bookmark   April 16, 2006 at 2:16PM
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the fees, forgot that one. yep i dont see much advantage to it.

    Bookmark   April 16, 2006 at 8:05PM
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Your 4.75 rate, assuming it is a fixed rate, is unbeatable. Rates now are above 6%. That is about a 25-30% increase in the interest rate. You are considering going from 60k to 40k which is a 33% decrease in the loan amount. After considering lengthening the term by restarting the loan clock, as well as the expense of a refinance, it seems like a wash. Your monthly payment likely won't change too much, but you will owe for longer.

Enjoy your 4.75 loan and try to ride it out.

    Bookmark   April 16, 2006 at 10:22PM
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you mention putting 20k down it wasn't clear, is that coming from savings?

    Bookmark   April 17, 2006 at 9:30AM
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if you cut nonessential spending and use part of the 20 to help make ends meet until she gets a new job, then you would likely be better leaving things alone.

    Bookmark   April 17, 2006 at 10:35AM
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Why not cut down on spending now, and start putting away money to use to help w/ the mortgage when the time comes?

I've never heard of refinancing into a higher rate.

    Bookmark   April 17, 2006 at 12:40PM
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yeah, I agree with above posts. You got a sweet deal on the current mortgage.

Eliminate cable/sat tv, internet, cell phones, eating out, vacation, etc...
Even pickup a part time job if possible.

    Bookmark   April 17, 2006 at 1:50PM
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thanks all, was just a thought. but now i have a signed purchase agreement on my home. so i dont need to worry about it, when its sold, we are going to buy a small condo, and will be able to pay cash, so we wont need a mortgage.

    Bookmark   April 17, 2006 at 7:47PM
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