Refi advice please... - Posted by Sheik


#1

Posted by Stacy (AZ) on October 22, 1998 at 16:37:24:

I’d go with option 3. Borrowing $10,000 at 7.25% will accellerate your REI activity much more quickly than $100 per month (option 2). Option 1 is a no-win, in my mind. Also, option 3 interest is probably tax deductable, making it even cheaper than 7.25%, making it very attractive.

You have equity that needs to be put to good use. I’d be asking myself why I’m allowing the rest of my equity to remain unused (beyond the $10K). You could turn the rest of your equity into liquid investment funds. This is, of course, depending upon your level of comfort with risk. For example, my limit is 80% of my home’s FMV.

Stacy


#2

Refi advice please… - Posted by Sheik

Posted by Sheik on October 22, 1998 at 15:31:47:

Hi all:

I think I know what’s the right thing to do but
I am looking for some reasurance.

I have the opportunity to refi my home and I am
wondering whether I should go ahead or not. Here’s
the scenario:

Market value - $130K; Want to keep my monthly approx $600.

CURRENT MORTGAGE:
N(remaining)= 247 I=8.625 PV(remaining) = 70K PMT=606.68

I am offered either a new 15yr @ 6.875 or a new 30yr @ 7.25.

MY ANALYSIS:
(15yr ANALYSIS)
N=180 I=6.875 PV(including closing cost)=74K PMT=659.97

In my opinion, its not worth doing the a refi for 15yr.
If I wanted a shorter term, I can simply add the difference
in payment to my current mortgage resulting in -

N(calculated)=200 I=8.625 PV=70K PMT=606.68+53.29=659.97

Refinancing would save me about 20 months of payment
(approx $12K)

(30 YR ANALYSIS)

Refi for 30yr without pulling out more cash.
N=360 I=7.25 PV(w/closing costs)=74K PMT(Calculated)=504.81

This results in a saving of about $100/mo (which I WILL
direct to my RE investing)

Going further: Refi for 30yr AND pull 10K cash for more
RE investing.
N=360 i=7.25 PV(w/closing costs)=84K PMT(calculated)=573.03

This last scenario results in $10K cold cash AND a monthly
savings of about $33 from my current payment.

So tell me what you think.
Shoud I do 1) 15yrs or 2) 30yrs w/ no cash or
3) 30yrs w/ cash or 4) nothing!

Thank you for going through this cumbersome analysis.
Your inputs are all welcome.

-Sheik