Help with refinancing?

Question

My husband and i are about to refinance our home to get his ex-wife off the loan (she has signed the quit claim a while ago) anyway since we have to refinance I was wanting to take 30K from the equity to fix up the house.

well in my budget i have it so we pay the house off in approx 18-24 months. and i was wondering what would be the best way to refinance. I was thinking maybe a 5/1 Arm so it would give us a little cusion (for the uhhh ohhh moments)

Being able to refinace for the money would be eaiser to make one payment to the house then try and skrimp and save for the contractor. Plus people tend to live within there means and i am afraid if we dont get the money then we will not be able to do the house up nice. We can easily afford 2000-2500 every two weeks each.

I was also contimplating a simple itrest loan since we always pay early and make extra payments every month. (thats how i do my car~it will be paid off in december.

I am just not sure what is the best.

The tax deductions dont out weigh the fact that i am paying someone else every month.

And i dont have any credit card debt.

Well the thats sort of what i was asking is what would be the best option. Like stated priviously my husband and i plan to make hefty payments per month but i didnt mention that we want to live there till I retire. (he is 13 years my senior) What we want to do is put the money and house and everything in a living trust for the children in about 10-15 years but we will still be the executors till the unevitable happens. my question was what would be the best angle of attach for a mortage that we are going to throw that much money at a month?

I am a penny pincher :)

Patrick~
I think you mis-read my question. I want to prepay. a 5/1 would give me 3 years breathing room. I am trying to find out if that is my best option though. I plan to have it paid off in 2 years. Why would i want to get somethign i cant pre-pay and why would i want to keep debt for so long?

Answer 1

You have thought this through. It is always best to have a plan and a contingency plan to back it up. The 5 Year is the best rate going right now on top of that so you get the best of both .
If your plan works out you are done (Agreed Tax deductions aren't a reason to have a mortgage) If your plan runs into some problems you still have to time to get back on track or to create a new plan.

I am not sure why but everywhere I price loans for clients the 5 year has a better rate than the 3?
Interest only actually will cost you a little in rate so with the accelerated payments that you are describing it may not make sense? Make sure and look at both IO and fully amortizing before you decide. DO NOT get a loan that has the potential to recast there is no reason to with your plan.

Ok besides the Mortgage stuff I am curious why you would put off the iving Trust. If you own a property Get one Now. The probate attorneys will take way more than they deserve and a Living trust is a document that can be revised and updated allowing you to keep it up to speed with your assetts.

I have in the last 5 years had to go through 2 probates, luckily they were summary probates and I could do them myself but a living trust would have made it a breeze.....

Take Care

Answer 2

I love the 5/1 ARM. It typically acts like a 30 yr in that is has a longer fixed option that you don't get with the teaser 2 and 3 yr. ARMS. I also think that an I/O option is a good on provided you can meet the payments if the loan recast. I would pay off any high interest credit cards that you have first before you look to pay off your mortgage. A mortgage is an excellent tax benefit while you are in your prime earning years. Credit cards are not. Good luck.

Additional comment. I still believe a 5/1 is a good alternative. If you are comfortable paying off your mortgage early than by all means do so. Tax benefits eqautes to more than paying someone else per se, especially if you are in a high income tax bracket, but over-all I do think your plan is a fair plan.

A living trust is an excellent idea! It seems like you have done some work. I would add, that if you are planning to pay the home off in 18-24 months an I/O may not be the best idea (the more I think) I/O's are for individuals that wish to lower their mortgage to either pay off high interest credit cards, Investment properties to cash flow and better yet for asset accumulation. The idea that you will make 2000-2500 principle reduction payments every 2 weeks leads me to believe that lower payments are not a major consideration, more the principle reduction. If I'm correct in my assumptions, an I/O would not be a benefit.

Answer 3

One of the reason home-owners refinance with cash-out is for home improvement. The question is what type of home loan you want to get ? and to answer this question you may need to find out how many years you plan to stay in the house ?. What is more important to you, lower payment for short period of time or higher payment for longer period of time?.

Here we are talking interest only Arm loan vs 30yr,40yr, or 50yr fixed loan ? You may need to ask your qualified mortgage professional these questions and figure out the proper finance that will serve the best of your interest.

Good Luck

Answer 4

The 5/1's aren't that competitive now days, ask your broker for a 7/1 or a 10/1. They will give you a little more breathing room. get one with no prepay and no points. Try WAMU or B of A... they are great these days.