Talking to a relative over the holidays we found out about "cash out" refinancing. I like this idea.
The concept is that you can pay off your long-term debts, like car payment and credit cards by rolling them into your new loan amount. And with rates at a record low, you can usually shorten the length of your loan and roll these expenses in, and still have about the same house payment.
While I realize it is actually extending the car payment (and other bills) for a longer period of time rather than them actually being paid off, it does lower your monthly bills considerably.
So that's how we spent part of our holiday vacation. Looks like we are headed toward a 20 year loan at 5.2%. That drops our 30 year loan by 4 years and only raises the house payment by about $50 a month (plus pays off a few lingering debts).
Probably the most exciting news is our house has appraised for 30 grand more than when we bought it 8 years ago! Wahoo! The downside of that is that every other house in town has also gone up, so we can forget about moving anywhere nicer. Since it is all relative, we may get more if we sell, but any place we buy will cost more, thus, our monthly expenses would be more. We are kinda stuck here, so may as well make the most of it.
Another nice thing you can do is to add your closing costs to your loan, thus allowing you to avoid the $3,000 or so you usually have to fork over at the signing. Again, I know it isn't the smartest thing, but it makes sense for us. And it is nice to finally get rid of the PMI payment.
The thing that I hate about all this is the fluctuation of loan rates. It is such a crap-shoot. When you lock it in, I am always thinking, "What if it drops lower tomorrow?" And if it does, you are SOL. But I did read today about something called a "float down" option. Seems it costs extra, but if rates drop, you can get them. Not sure if my lender offers that, if I can afford it or if it is too late. I will ask about it though.
It is somewhat hard to find past loan rates online. I'd think it would be a no-brainer to post the daily changes in mortgage rates for the past few weeks, but I've not been able to find anything like that. Could it be because no one wants you to know if you missed out on a better rate? Hmmm, a conspiracy is afoot!
Further Reading:
MSNBC - Refinancing climbs, rates go lower
Mortgage101 - Should you refinance?
Pantagraph.com - Rate Tracker
Interest.com - To lock or not to lock?
Leave a comment