Debating a mortgage refi with cash out

**nodmicks** · 05-04-2009, 02:38 PM

We are debt free but the mortgage. The current rate on a 15 year is at 4.65%. Our current mortgage is 6.625 % with a balance of $49,926.46. The new payment with a refi with cash out(10,000) would be $70 higher a month while cutting 4 years off the term of the loan since we would lave 15 years left instead of 19 years.

The $10,000 would go towards a new roof. We want the life time guaranteed metal roofing. The roof is shot according to two roofers because the idiot that did it skipped many things. We have had one area repaired and now need another imediately repaired. Seems silly to keep spending on repairs when the whole roof needs to be done.

There are many things that need to be done to the house, windows, doors, etc but the roof is 1st.

I do have 3 months of expenses in the EF but after Dh's last layoff we refuse to touch that as we know how necessary it is.

I guess because we worked so long to be debt free I feel like I am doing something majorly wrong by doing a refi with the cashout for the roof though the numbers make sense.

We are also anticipating needing to replace a car in the next year. That is something I also need to start saving for.

I can save approx an additional 500 a month on top of the $40 weekly auto draft to ef (trying to get closer to 6 months again feel shakewy at a tad over 3 after the layoff ). The roof is 10K. The roof would fall in by the time I had the cash to pay for it.

Ok so tell me am I grappling with this mortgage issue out of plain fear of debt or does the math and cutting years off the loan justify the means??

Any ideas or opinions? Help!

Another note~ refi on just the balance of the loan without the 10K cash out leaves the payment exactly the same as it is currently but saves 4 years.

**nodmicks** · 05-04-2009, 07:22 PM

bumping as I'd love some assistance with this issue

**frugalfriend** · 05-04-2009, 07:32 PM

I've been thinking about this, and it sounds like a good move but not totally sure. Where's Greebo when you need him??? LOL He'd know!

You definitely should refi if you are planning to stay in your house for awhile, since rates are in the 4's, and it's an awesome time to do so!

**nodmicks** · 05-04-2009, 07:44 PM

Thanks Frugalfriend. Unless Dh would get transfered or something we plan to be here 6 years to forever

. Hummm maybe I'll try doing a thread to get Greebo over here!

**frugalfriend** · 05-04-2009, 07:47 PM

I really trust his opinion. Maybe you could PM him?

**nodmicks** · 05-04-2009, 07:49 PM

Originally Posted by frugalfriend

I really trust his opinion. Maybe you could PM him?

Oh good idea! I never thought of pm!!! Thanks

**ladytoysdream** · 05-04-2009, 07:56 PM

Shaving 4 yrs off is a VERY good thing. You got a good percentage.

Can you just buy the materials and maybe family / friends could help with the labor on the roof ?
Oh, I just reread and see you are going metal. We almost went metal and then went with the longer life time shingles for ours.

Our mortgage was paid off just over 4 years ago. Three yrs ago, we got a fixed rate, 10 yr home equity loan. That did our new siding, new roof, all new windows, new room, and a new deck with roof. Then a year ago, we took a second 10 yr, home equity loan to put in our outside wood furnace. Ours are at 6.75 and 6.25 The bank called the other day and wants us to combine them and go down to 5.15 percent, But if we do that , then we lose the life and disability insurance on the older loan. And to replace the life insurance only would be way too high. We would lose more than we would gain. So we might just leave ours alone. Still pushing the pencil though.

**Michelle68** · 05-04-2009, 11:41 PM

It sounds like a good deal to me, especially if you are taking a few years off the mortgage. The only thing to consider (And I admit, I'm kind of ignorant when it comes to rerfinancing.), but would it increase the amount of debt you owe on the house once you've refinanced?

**nodmicks** · 05-05-2009, 08:03 AM

Originally Posted by Michelle68

It sounds like a good deal to me, especially if you are taking a few years off the mortgage. The only thing to consider (And I admit, I'm kind of ignorant when it comes to rerfinancing.), but would it increase the amount of debt you owe on the house once you've refinanced?

Yes it would Michelle by $10,000 if we took out the $ for repairs. That is where I have the indecision as Dh and I vowed years ago no more debt. However it would substancially increase the value of the house.

**nodmicks** · 05-05-2009, 08:04 AM

Originally Posted by ladytoysdream

Shaving 4 yrs off is a VERY good thing. You got a good percentage.

Can you just buy the materials and maybe family / friends could help with the labor on the roof ?
Oh, I just reread and see you are going metal. We almost went metal and then went with the longer life time shingles for ours.

Our mortgage was paid off just over 4 years ago. Three yrs ago, we got a fixed rate, 10 yr home equity loan. That did our new siding, new roof, all new windows, new room, and a new deck with roof. Then a year ago, we took a second 10 yr, home equity loan to put in our outside wood furnace. Ours are at 6.75 and 6.25 The bank called the other day and wants us to combine them and go down to 5.15 percent, But if we do that , then we lose the life and disability insurance on the older loan. And to replace the life insurance only would be way too high. We would lose more than we would gain. So we might just leave ours alone. Still pushing the pencil though.

I don't think I'd change that either!

Dh has a buddy that says he can do the metal roof. However I saw his so no thanks!

**Greebo** · 05-05-2009, 08:24 AM

There are really three questions here:

First - will you save enough money by refinancing to make it worth while. You need to know what your closing costs will be of the refinance.

If your current mortgage has 19 years left and you owe $49,926.46 then your monthly payment at 6.625% is about $385.50, not counting taxes and insurance, am I right? That means you have $39,967.78 in interest left to pay, if you pay at just that payment level for the life of the loan.

So - if you refi to 4.65% at 15 years, your payment will stay almost the same - going up $0.27/month ($385.77) BUT your total interest paid will be $18,512.61 saving you $18455.17 in interest, assuming again, minimum payments made. That makes refinancing worth while, IMO.

If you add 10k to the mortgage and refi ty 4.65% then your payment will go up to $463.04 and your total interest paid will be $23,420.88 saving you only $14,456.90 in interest payments.

So if you *borrow* the $10k it will actually cost you $13,908.27 in total interest.

So that begs the question - how fast can you save $10k if your mortgage payment stays the same?

Me? I'd refinance AS IS, and save the 10k, leaving myself $18k richer at the end instead of only $14k richer.

**frugalwarrior** · 05-05-2009, 08:44 AM

Please get the roof. If you are waiting and it's that bad it will cost you in the long run. I have two seperate areas that need drywall/insulation repair because it rained 1 week before the roofer could get here. I fiqure that may cost me a grand. I would hate to hear of anyone else having to deal with that. Do you have a relative that would lend you the money at no interest short term in exchange for goods or favors?

**nodmicks** · 05-05-2009, 09:12 AM

Originally Posted by Greebo

There are really three questions here:

First - will you save enough money by refinancing to make it worth while. You need to know what your closing costs will be of the refinance.

If your current mortgage has 19 years left and you owe $49,926.46 then your monthly payment at 6.625% is about $385.50, not counting taxes and insurance, am I right? That means you have $39,967.78 in interest left to pay, if you pay at just that payment level for the life of the loan.

So - if you refi to 4.65% at 15 years, your payment will stay almost the same - going up $0.27/month ($385.77) BUT your total interest paid will be $18,512.61 saving you $18455.17 in interest, assuming again, minimum payments made. That makes refinancing worth while, IMO.

If you add 10k to the mortgage and refi ty 4.65% then your payment will go up to $463.04 and your total interest paid will be $23,420.88 saving you only $14,456.90 in interest payments.

So if you *borrow* the $10k it will actually cost you $13,908.27 in total interest.

So that begs the question - how fast can you save $10k if your mortgage payment stays the same?

Me? I'd refinance AS IS, and save the 10k, leaving myself $18k richer at the end instead of only $14k richer.

Greebo thank you! Am I getting this correctly that I save either way? Thats how I am taking this.

It would take quite a while to save 10K. I could use the 7K in the ef but I'm scared to death to spend it. Kind of silly really because even when Dh got laid off we never touched it. We did end up using a big chunk bringing us back to 3 months in there for a big homeowners mess though.

**nodmicks** · 05-05-2009, 09:17 AM

Originally Posted by frugalwarrior

Please get the roof. If you are waiting and it's that bad it will cost you in the long run. I have two seperate areas that need drywall/insulation repair because it rained 1 week before the roofer could get here. I fiqure that may cost me a grand. I would hate to hear of anyone else having to deal with that. Do you have a relative that would lend you the money at no interest short term in exchange for goods or favors?

We have one area in the kitchen ceilinmg that needs drywall repair due to the area we already fixed.

It will be approx 560 to repair the other area of the roof but both roofers said it all should be redone. What a shame as it was brand new when we bought the house.

We could take a good chunk of it from the EF but I'm afraid to use it. I'd be too embarassed to borrow from family to be honest. I'd use the retirement accounts first (which I wouldn't really do to be honest)

**mommy4ever** · 05-05-2009, 09:18 AM

Greebo,

What if she refinanced adding the 10K for the roof, but paid extra on it, as though she were paying a loan? If she paid an extra $200 a month, what would that do to the interest, what about $100?

Nodmicks, are you in a position to make extra payments on the mortgage to get that 10K paid off asap?

I am not against refinancing at all. You're debt free, and have proven you can maintain that status. Fixing your house isn't a bad debt, it's an investment to the value of your home. While you are borrowing against the value of your home, you are also protecting your investment and increasing it's worth.