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Wednesday, 4 March 2020

Very good discussion on Refinancing mortgage

Refinancing mortgage after 15 years? (self.personalfinance)
submitted   by soobak4u​
So my parents did quite well for themselves in the early 90s and so they bought a nice house in New York. Fast forward about 30 years and many many unbelievably bad decisions (bad business decisions, second mortgage and taking out a HELOC, etc) and being scammed a few times the house has about 15 years left on the mortgage with about 465k left to pay. The rate is about 4.75% but I believe its not fixed and we pay almost 4.8k a month.
The house is worth about 920k but its in really bad shape. We have the option refinancing the 465k at around 4-4.25% which will save us about 1.5k a month if we take 30 years or 1k for 20 years. We can do a cash out refinance at for around 35k and save us about 1.4k a month over 30 years or 800 for 20 years. Fees would be around 7-7.5k. I was thinking taking the cash out and fixing up the house.
Is there any scenario where this worth it at all? Honestly the 5k a month is quite burdensome so a 1.4-1.5k a month would be huge. I do understand that if I do this reset though the amount I pay in the long run would be significantly more as well.
Thanks!
Edit I forgot to mention - the rate is a bit higher than the current rates because my parents income is almost non existant and this we're doing this through a no income program. Plus their credit is around 730 which is affecting it further.

[–]sunnymeek​ 11 points  
With their age and lack of income, I'd be looking at selling and downsizing to a smaller place that they can afford. Possibly in a cheaper neighborhood. With their equity they can buy a much cheaper place outright and be in a much better position going forward.
[–]soobak4u​[S] 1 point  
I am paying the mortgage on their behalf at the moment. I'm on the deed and eventually I'll take over the mortgage as well.
[–]Gravity-Rides​ 3 points  
Honestly, if the house is worth ~900k as is and livable, I probably wouldn't cash out equity to finance home improvements. It sounds like you would be better off getting a lower rate and taking advantage of improved cash flow, though that comes with fees and resetting the term. If the current mortgage is variable rate, that is bad news and I would probably try to get a fixed rate regardless.
With the improved cash flow, just use that money saved every month to finance any improvements the property needs.
[–]soobak4u​[S] 1 point  
The cash flow is the biggest draw but oh man having to go through it another 30 years hurts.
In terms of cash out vs not, it's only a 100 dollar difference per month. Is it not worth it then?
Thanks!
[–]Gravity-Rides​ 1 point  
IDK. What do their incomes / budgets and retirements look like? On the surface, sure, it's only an extra $100 per month. But it is an extra $39k that will need to be paid back with interest. It might make sense if the plan is to sell the house and downsize in a few years / months if they can recover that cost.
[–]sunnymeek​ 1 point  
You should definitely be looking to refinance. 4-4.25 seems high from what others have been saying they can get, so shop around some more.
As far as the best loan to do, it really depends. How old are you parents? Are they still working? Will they be able to make payments for 20-30 more years, or are you taking this over? How much can you afford?
If it's in really bad shape, 35k probably won't really fix it. But maybe having an extra $1500 a month can start making a dent in the maintenance.
[–]soobak4u​[S] 1 point  
Hi thanks for the response. I did edit my post to mention why the rates are what it is but it's because my parents have no money and a not so excellent credit score.
They're going to hit their 60s and yes I'd take over in a few years. The kitchen and bathrooms are the biggest issues. They're workable but definitely need repairs. I wasn't thinking of a total overhaul but just to fix it so it'll be good for another 5-10 years hopefully?
Thanks!
[–]FlyingPhotog​ 1 point  
Just locked in a refi on a $465,000 balance at 3.625% with almost all the costs covered by lender credits.




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