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Over the past 6-8 years, I have been working to improve my credit score and wife's credit score.  Lately we are both in the 840-850 range with about 20 types of credit vehicles (mortgage, HELOC, auto loan, student loans, credit cards, store cards, etc.)  Looking for some advice on my best course of action to take advantage of my situation. 

Here's a short version of the past 8-10 years:  Bought a fixer-upper house in 2008 and "financed" most of the $100k renovation on various credit cards (0% BT, HELOC, etc.)  As of now, we have all cards paid off except for the HELOC ($22k balance left).  Sometime in 2010, the HELOC bank essentially closed the door for further draws on the HELOC, citing the changed LTV ratio of our house and mortgage.  Since that time, we have been making the payments as normal.  We owe $220k on the first mortgage at 4.25% (21 years left), and $22k on the HELOC (variable rate, approx 4.5%).  House is worth approx $400k.  We have a moderate savings account, contribute to the 401ks at work, and try to max the Roth IRA for the past few years.  We just had our first child so not sure if the wife will be staying home, reducing hours to part-time, or having to pay for day-care.  Big bills for us are the wife's student loans ($60k left at 3.75%) which we pay almost $900/month (law school).

I'm looking for ways to maximize our situation of increasing credit scores and increasing equity in the house.  We miss out on some tax breaks (28% bracket) such as the Student Loan interest deduction the past 2 years, and I believe we will not qualify for the child tax deduction this year.  To counteract this, I'm deciding if maxing the 401k plans at work is possible to reduce MAGI, or whether we should plow any extra money into the student loans.  We may have to do a backdoor Roth this year as well.

1. After talking to my bank, the only way the HELOC line of credit will reopened is through an appraisal ($400 cost to us), or to refinance the HELOC (no cost to us.)  With our good credit score and improved LTV situation since 2010, I'm fairly certain this would be an easy choice (original was for $30k, I may try for $50k or $75k HELOC).
2. Option #2 is to refinance the mortgage with a cash-out option (paid off the HELOC) and hope for a better rate than 4.25%.  We intend to stay in the house for at least another 5-7 years.
3. If we get approved for the HELOC, I may think about paying some of the student loans off with HELOC money.  This way, we can still claim the mortgage interest deduction, even if the we are no longer eligible for the student loan interest deduction.  Another more risky play would be to use a few 0% BTs to pay off some or all of the student loan.

Any thoughts on my ramblings above?  I'd rather not have to get into an entire new mortgage or pay points, but if it is worth it, I'd gladly jump through hoops to see what can be done to help my situation.  I eager to put my "good credit score" to work for my now that I've the great care to improve it over the years.

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One benefit of a heloc is you can submit an all cash offer and it will be easier to win a bidding war.

Also for a heloc... (more)

rennt (Jul. 27, 2017 @ 4:25p) |

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rennt (Jul. 27, 2017 @ 4:27p) |

If you rolled it in, your loan amount would be $230,431 and cash to close would be close to $0 (some fees and lender cre... (more)

scripta (Jul. 27, 2017 @ 5:51p) |

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I would personally max out the 401k before paying down the student loan because you are in the 28% bracket. Do you have $22k so you can do a normal refinance instead of a cash out?

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If your wife stops working or works part time to be a stay at home mom are you able to cover all the bills as-is on your income? If not, this would be a big reason to require a less than ideal lump sum payoff to reduce your monthly outlay.

I would also seek to max your IRA/401k for being in the 28% bracket and if doing so reduces your taxable income enough to allow you to take student loan deductions and ROTH contributions, that is even better. While paying down your wife's student loans and being rid of that $900/mo bill seems great, it is also the lowest rate loan you have and has potential to be an above the line deduction. As long as you are comfortable swinging this payment, this ideally would be one of the last bills you contribute extra towards, if at all.

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CorradoJr said:   I'd rather not have to get into an entire new mortgage or pay points, but if it is worth it, I'd gladly jump through hoops to see what can be done to help my situation.Paying points isn't required. I personally recommend against ever paying points. Ever. You can always choose a slightly higher rate, and the difference will cover closing costs and possibly pay you.

If I were you, I'd refi your mortgage right now to a brand new 30-yr fixed. I'm seeing 3.875% (no fees, no points, a few hundred in lender credit). Could be different in your state. With this new mortgage, your minimum required monthly payment will go down significantly ($220K is only $1033/mo). You can always pay more, but now you won't have to -- you could max your 401k's, pay off HELOC and student loans faster, etc. While doing the refi, you can increase the principal balance of the new mortgage by a few grand without making it a cash-out refi -- have it cover all your closing costs, prepay the escrow account, and ask to get paid just under $2K at closing, None of these are considered "cash-out" from my experience in CA (your state may have different rules, although I suspect these are federal).

Increasing 401k contributions reduces MAGI, but if you're already in the 28% bracket (taxable income > $191650), it'll be difficult to get your MAGI below the student loan interest deduction limit (phases out $130K-$160K). You should max 401k contributions even if it doesn't help you with student loans.

If the student loan is at 3.75% fixed, I would just pay the minimum. I think the $900/mo you're paying is a lot more than minimum. Pay the minimum and invest the rest, you'll probably have better returns.

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scripta said:   CorradoJr said:   I'd rather not have to get into an entire new mortgage or pay points, but if it is worth it, I'd gladly jump through hoops to see what can be done to help my situation.Paying points isn't required. I personally recommend against ever paying points. Ever. You can always choose a slightly higher rate, and the difference will cover closing costs and possibly pay you.

If I were you, I'd refi your mortgage right now to a brand new 30-yr fixed. I'm seeing 3.875% (no fees, no points, a few hundred in lender credit). Could be different in your state. With this new mortgage, your minimum required monthly payment will go down significantly ($220K is only $1033/mo). You can always pay more, but now you won't have to -- you could max your 401k's, pay off HELOC and student loans faster, etc. While doing the refi, you can increase the principal balance of the new mortgage by a few grand without making it a cash-out refi -- have it cover all your closing costs, prepay the escrow account, and ask to get paid just under $2K at closing, None of these are considered "cash-out" from my experience in CA (your state may have different rules, although I suspect these are federal).

Increasing 401k contributions reduces MAGI, but if you're already in the 28% bracket (taxable income > $191650), it'll be difficult to get your MAGI below the student loan interest deduction limit (phases out $130K-$160K). You should max 401k contributions even if it doesn't help you with student loans.

If the student loan is at 3.75% fixed, I would just pay the minimum. I think the $900/mo you're paying is a lot more than minimum. Pay the minimum and invest the rest, you'll probably have better returns.


Thank you for this line of thinking, I really like this idea.

Do I have to payoff the HELOC during the refinance process, or can I keep it as is? As you said, I'd like the idea of refinancing the mortgage (to lower my monthly outlays) and use a little extra every month to pay off the HELOC faster.

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Most 1st mortgage refis allow you to subordinate the HELOC so that you can keep it as-is if you don't want to pay it off in the 1st note refinance. Your HELOC lender will charge a fee and likely your escrow company for this part.

Rasheed

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You can keep it, but according to a quick google search it may take a little longer and possibly cost more (if the lender wants you to lock for a longer period than the default 30 days) to do the refi due to resubordination:
https://www.zillow.com/advice-thread/Does-HELOC-have-to-be-close...
http://www.bankrate.com/finance/refinance/resubordination-proces...

If I were you I would just pay off the HELOC from savings before refinancing. With your high income you should be saving a lot of money every month, so this should not be difficult for you.

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If you are really only staying 5-7 years in the home, then refi now to an ARM (5/1, 7/1, or even 5/5 from Penfed). You should be able to get something around 3%. No brainer move. I'd do it even in my forever home (I did).

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Wanted to provide an update on my situation and thank everyone for the replies.

I am working with eRates (found after shopping around on BankRate and Zillow) to apply for a Refinanced 30 year mortgage at 3.875% without a cash-out option. My HELOC will be subordinated to the new first mortgage.

Lots of Loan Officers I talked to were steering me in the direction of a cash-out Refi to roll the HELOC into the new mortgage. This had the effect of putting my mortgage amount almost back up to what it was 8 years ago, and hardly lowered the payment.

There is a fee involved with having the HELOC subordinated and the closing takes longer (60 days) but I feel this will give me 1) a lower first mortgage payment but about $300 less per month, and 2)allow me the flexibility to pay off the HELOC as quickly or slowly as I want, or to put the extra cash into investments or using increasing my 401k deductions as well to max them out.

The Refi will "cost" me about $2800 total ($1500-1800 for title costs, $460 for appraisal fees and the remaining on other Misc fees). As I understand, my state (PA) has high title costs.

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eRates is frequently at the top of the chart. The chart doesn't include the 60-day lock extension fee, but I'm guessing it's very similar across different issuers.

Do you not have enough savings to pay off the HELOC? You are basically paying extra fees (resubordination + 60-day lock extension) to hold on to a $22K loan for what may be a very short time. It might even be cheaper to use credit card balance transfer checks to pay off the HELOC before refinancing.

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I missed it....why do you want to do anything? It sounds like you're doing great!
4.25% is a pretty good rate....I'm skeptical at the rates posted above....and whatever you do--don't refinance into a 30 year mortgage and start paying all that interest all over again.  (Not to mention transaction costs of refinancing).  If you insist on refinancing, refinance into a 15 or 20 year loan and really do a cost analysis and figure out in which year you will break even.  I don't think it's worth thinking about further, but that's just my gut reaction.

What are the interest rates on the student loans? I think you should aggressively pay them and if high interest rate, refinance the HELOC only to get out of a bad rate situation. But if the student loans are ok....just keep doing what you're doing. I think you've had great discipline and you now owe approx half of your house free and clear!

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myfrogger said:   I missed it....why do you want to do anything? It sounds like you're doing great!
4.25% is a pretty good rate....I'm skeptical at the rates posted above....and whatever you do--don't refinance into a 30 year mortgage and start paying all that interest all over again.  (Not to mention transaction costs of refinancing).  If you insist on refinancing, refinance into a 15 or 20 year loan and really do a cost analysis and figure out in which year you will break even.  I don't think it's worth thinking about further, but that's just my gut reaction.
The interest paid on a loan depends only on the interest rate -- it does not "start all over again." If you have two loans for the same amount at the same interest rate, then the monthly interest payment will be exactly the same regardless of how long you have left to pay. The total interest paid over the lives of the two loans will, of course, be different, but even if he refinances into a 30-yr, he can always choose to make larger payments to pay it off sooner.

This is Finance, where math rules -- keep your gut feelings in the gut.

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scripta said:   eRates is frequently at the top of the chart. The chart doesn't include the 60-day lock extension fee, but I'm guessing it's very similar across different issuers.

Do you not have enough savings to pay off the HELOC? You are basically paying extra fees (resubordination + 60-day lock extension) to hold on to a $22K loan for what may be a very short time. It might even be cheaper to use credit card balance transfer checks to pay off the HELOC before refinancing.


I don't have enough liquid to pay it off at the moment - I could do a 0% BT but that would most likely have some small fees (most I have access to are 2 or 3% fee) as well as me missing out on the tax deductibility of the HELOC interest payment in my tax bracket.

I've heard mention that a 60 day lock "costs more" than a 45 or 30 day lock, but couldn't find much regarding this. My loan officer was highly recommending 60 days to have the subordination process clear and not jeopardize the closing date. If it does cost more, I assume it would be baked into the APR. I'm locked in at 3.875 with 0.125 lender credit point. The other option I had was 3.750 with me paying .5 points which I didn't like.

At this point I have also considered throwing a few thousand extra at my existing principal mortgage for the 8/1 payment to lower the overall amout borrowed (and lower the monthly payment.). Not sure if this is a good idea or it it would irritate my loan person causing some paperwork to be corrected (i.e. I applied for a $223k loan and now I need a $220k loan).

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The lock extension is probably baked into the lender credit -- it would've been more than 0.125 with the standard 30-day lock.
CorradoJr said:   At this point I have also considered throwing a few thousand extra at my existing principal mortgage for the 8/1 payment to lower the overall amout borrowed (and lower the monthly payment.). Not sure if this is a good idea or it it would irritate my loan person causing some paperwork to be corrected (i.e. I applied for a $223k loan and now I need a $220k loan).The numbers will adjust before you close anyway, because they only gave you estimates for all the other fees. Those estimates will change. As long as your LTV and DTI don't exceed any thresholds (and they won't in your case), changing the loan amount shouldn't be an issue.

However, IMO it is not a good idea to pay it down -- you should borrow as much as possible instead. Mortgage rates are pretty low and will likely rise, the interest is deductible, and the rest is just inflation. Point is, the real cost of borrowing this money is very low and you'd be better off investing the difference instead of dumping it into your home. As I suggested earlier you should roll the escrow deposit into the new loan too and ask for a check at the end for the maximum amount allowed without making it a cash-out refi.

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Here's one other tip, although since you already locked it might be too late -- when you called erates, did they know you found them on zillow and give you the same rates and fees you saw in a quote on zillow? You gotta stay on top of that.

An interesting tidbit about eRates. It's a subsidiary of Finance of America Mortgage, and mortgage brokers who work for FoAM are not able to match the rates/fees that eRates offers on Zillow.

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scripta said:   
myfrogger said:   I missed it....why do you want to do anything? It sounds like you're doing great!
4.25% is a pretty good rate....I'm skeptical at the rates posted above....and whatever you do--don't refinance into a 30 year mortgage and start paying all that interest all over again.  (Not to mention transaction costs of refinancing).  If you insist on refinancing, refinance into a 15 or 20 year loan and really do a cost analysis and figure out in which year you will break even.  I don't think it's worth thinking about further, but that's just my gut reaction.

The interest paid on a loan depends only on the interest rate -- it does not "start all over again." If you have two loans for the same amount at the same interest rate, then the monthly interest payment will be exactly the same regardless of how long you have left to pay. The total interest paid over the lives of the two loans will, of course, be different, but even if he refinances into a 30-yr, he can always choose to make larger payments to pay it off sooner.

This is Finance, where math rules -- keep your gut feelings in the gut.

     You're right to pick apart my wording.  Starting the interest over is a bad way of saying it. My only comment here is if you have 21 years left to pay on your loan and you refinance into a 30 year loan, you're not saving money.

I'd also caution you on borrowing the most you can to be able to make other investments with your home's equity.

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myfrogger said:   
scripta said:   
myfrogger said:   I missed it....why do you want to do anything? It sounds like you're doing great!
4.25% is a pretty good rate....I'm skeptical at the rates posted above....and whatever you do--don't refinance into a 30 year mortgage and start paying all that interest all over again.  (Not to mention transaction costs of refinancing).  If you insist on refinancing, refinance into a 15 or 20 year loan and really do a cost analysis and figure out in which year you will break even.  I don't think it's worth thinking about further, but that's just my gut reaction.

The interest paid on a loan depends only on the interest rate -- it does not "start all over again." If you have two loans for the same amount at the same interest rate, then the monthly interest payment will be exactly the same regardless of how long you have left to pay. The total interest paid over the lives of the two loans will, of course, be different, but even if he refinances into a 30-yr, he can always choose to make larger payments to pay it off sooner.

This is Finance, where math rules -- keep your gut feelings in the gut.

     You're right to pick apart my wording.  Starting the interest over is a bad way of saying it. My only comment here is if you have 21 years left to pay on your loan and you refinance into a 30 year loan, you're not saving money.

I'd also caution you on borrowing the most you can to be able to make other investments with your home's equity.

  Not true.  If i refinance $100k from 5% to 4% at no cost, I'm saving ~$1k interest the first year.  I can keep making the same payment if i want to (silly IMO at these artificially low rates though, But it IS an option for the Dave Ramsey types...), and since the new 30yr mortgage is at a lower interest rate that means the term will end up being shorter than the time remaining on the previous mortgage. 

 Alternately, I can reduce mortgage payments to the new lower required payment amount and add more to my long term investments sooner and decrease the risk of my portfolio (because investing earlier extends the time horizon before withdrawal).  A sub-4% fixed mortgage is basically a loan near 0% when subtracting inflation.

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Bend3r said:   myfrogger said:   
scripta said:   
myfrogger said:   I missed it....why do you want to do anything? It sounds like you're doing great!
4.25% is a pretty good rate....I'm skeptical at the rates posted above....and whatever you do--don't refinance into a 30 year mortgage and start paying all that interest all over again.  (Not to mention transaction costs of refinancing).  If you insist on refinancing, refinance into a 15 or 20 year loan and really do a cost analysis and figure out in which year you will break even.  I don't think it's worth thinking about further, but that's just my gut reaction.

The interest paid on a loan depends only on the interest rate -- it does not "start all over again." If you have two loans for the same amount at the same interest rate, then the monthly interest payment will be exactly the same regardless of how long you have left to pay. The total interest paid over the lives of the two loans will, of course, be different, but even if he refinances into a 30-yr, he can always choose to make larger payments to pay it off sooner.

This is Finance, where math rules -- keep your gut feelings in the gut.

     You're right to pick apart my wording.  Starting the interest over is a bad way of saying it. My only comment here is if you have 21 years left to pay on your loan and you refinance into a 30 year loan, you're not saving money.

I'd also caution you on borrowing the most you can to be able to make other investments with your home's equity.

  Not true.  If i refinance a $100k from 5% to 4% at no cost, I'm saving ~$1k interest the first year.  I can keep making the same payment if i want to (silly at these artificially low rates though...), and since the new 30yr mortgage is at a lower interest rate that means the term will end up being shorter than the time remaining on the previous mortgage. 

 Alternately, I can reduce mortgage payments to the new lower required payment amount and add more to my long term investments sooner and decrease the risk of my portfolio (because investing earlier extends the time horizon).  A sub-4% fixed mortgage is basically a loan near 0% when subtracting inflation.


Depends on the bank. Not every bank will allow you to make exrra payments whenever you want to.

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rentc said:   Depends on the bank. Not every bank will allow you to make exrra payments whenever you want to.It depends on the mortgage terms (promissory note). I'm pretty sure Dodd-Frank and CFPB effectively killed the prepayment penalty.

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Let's do the math....

$220k 4.25% interest with 21 years left = $112,953 in interest to the bank over the life of the loan
$220k 3.75% interest with 30 years left = $146,789 in interest to the bank over the life of the loan

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myfrogger, that is a big oversimplification of the financial impacts. If you're obsessed with "interest to the bank" and want to just stick to this measure as motivation, ok, but it's not too complicated to make a more complete projection.

With the 21 year option, monthly payment is 1321.24
With the 30 year option, monthly payment is 1018.85

So for 21 years, you are paying out an extra $300+ every month. Many of us can safely assume that cash flow will be put to good use - maxing out tax-advantage savings, long-term liquid investments like the S&P 500, keeping a full emergency fund. There's no guarantee about what you'll produce with that money, but with a 21 year window, I think it's reasonable to expect a return better than either interest rate. Whatever you expect from the future or your own discipline, at the end of 21 years you've paid:
21 year term: 332,952.48
30 year term: 256,750.20

It's only then that the shorter repayment window starts to catch up. At a healthy clip of $1018 per month, but that doesn't sound like a ton of money in 2038. At that point, the longer term/lower rate has built an edge of over $75k. It's a very easy choice to me, but your emotional issue with it is not unusual.

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myfrogger said:   Let's do the math....

$220k 4.25% interest with 21 years left = $112,953 in interest to the bank over the life of the loan with $1321.24 monthly payment.
$220k 3.75% interest with 30 years left = $146,789 in interest to the bank over 30years with only a $1018.85 monthly payments OR $91,107.19 interest total over 19.622 years of payments when paying $1321.25 a month, which is $21845.81 less interest paid using your "math"

  Years left is a maximum not a requirement.  Your interest totals with minimum required payments are also not painting a full picture because you're summing money paid at different times with an equal weight.  2017 dollars are not equivalent to 2047 dollars.  Future dollars can be multiplied by a discount rate before being added to present day dollars.  That's the "doing the math" approach though, not the "I inherited all my money and keep it stuffed in a mattress, so it always has the same value" method.  This requires picking a rate for opportunity cost as well as a rate for expected inflation, so I did not do an example.

Using Your "limited math" approach (ignoring monies paid at different times have different values), a no-cost refi from 4.25% to 3.75% saves almost $22k interest paid over the remaining life of the loan if you continue to pay the same amount each month.  Last payment is rounded in the calculation.  Obviously you'd pay the remaining balance on the 236th payment and not reach exactly 19.622 years.  If you intended to go this route and give up the cash flow insurance (being ABLE to make smaller payments if you needed to or ever decided to invest the funds instead), a 20yr no cost would be better than 30yr IF IT WERE AVAILABLE at no cost at the same or lower rate.  This is not guaranteed because 20yr are uncommon and thus not as competitive and the lender credits also cost more rate - there's less than 0.125% rate difference between no cost refi 30yr vs 20yr at the one quote I just looked at.

 

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So you guys are either talking about....
1. Indeed paying the higher amount of interest to the bank but thinking it's a good idea to use that extra borrowed money to invest. You're talking about borrowing money to invest.
2. Paying off the mortgage sooner by making the same payment as now which means there is no reason not to do a 15 or 20 year mortgage to begin with. I agree a 20 year mortgage is likely a higher interest rate, which is why I suggested a 15 year. A 15 year would increase the payment....which may or may not be the OP's goal.

If the OP is really refinancing to save $22k over the life of the loan as Bend3r states, that's reasonable but realize the savings is towards the end of the loan and not in the beginning. The OP mentions he may stay for only 5-7 more years in the house so maybe we all are wrong to calculate the math over the life of the loan.

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myfrogger said:   So you guys are either talking about....
1. Indeed paying the higher amount of interest to the bank but thinking it's a good idea to use that extra borrowed money to invest. You're talking about borrowing money to invest.
2. Paying off the mortgage sooner by making the same payment as now which means there is no reason not to do a 15 or 20 year mortgage to begin with. I agree a 20 year mortgage is likely a higher interest rate, which is why I suggested a 15 year. A 15 year would increase the payment....which may or may not be the OP's goal.
1. Kind of, but not necessarily. Again, as long as he is refinancing into a lower interest rate, the fact that it's a longer term does not matter at all.
2. Not only do you get the option of paying off the new mortgage faster than the original by making the same payments, you also have the flexibility of a lower minimum monthly payment. This is the reason to not go for a 15-yr mortgage. The other reason is that the rates are so low and the likelihood of rates increasing at some point in the next 20 years is pretty high, so you're more likely to come out ahead if you borrow at the fixed low rate and invest for a higher rate return. Refinancing into a 15-yr mortgage makes sense for some people because of the lower rate, but here's one where it does not -- if you want to purchase a second home or an investment property, your income and monthly debt payments will determine the maximum amount of money you could borrow. Because the 15-yr mortgage has significantly higher monthly payments than a 30-yr, it will reduce the amount you could borrow.
myfrogger said:   ...that's reasonable but realize the savings is towards the end of the loan and not in the beginning. The OP mentions he may stay for only 5-7 more years in the house so maybe we all are wrong to calculate the math over the life of the loan.You're wrong, again -- most savings on the interest are early on, while the principal is highest.

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OP, after you've listened to our ramblings let us know what you decide to do

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Yes, myfrogger, I'm mostly talking about your 1st option - effectively borrowing money to invest. But again, that oversimplifies it.

The loan in this case is:
Extremely inexpensive
May have a tax advantage
Fixed rate
Not flexible if paid early

The appeal of this plan would change for me if any of those changed. And "to invest" is also too general I think. I'm not day-trading or even buying specific stocks to hold. I stick to simpler and safer index funds. There's no guarantee with this plan, but over a 20 year window, the S&P 500 has never lost money. According to this chart, the worst 20 year period returned 3.11% annually.
http://allfinancialmatters.com/wp-content/uploads/2013/01/SP-500...

That's the only time it lagged the mortgage interest rates we're discussing now. That's a level of uncertainty I'm comfortable with, and I think I'm very risk-averse.

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Hi all,
Thanks for all the advice. Here's where I stand so far:
My home appraisal was completed and it came back a little higher than I was hoping which is good. I have an "estimated figures" sheet from the lender they want me to give a "yes" to before moving forward.

LTV ratio 54%
CLTV ratio 60%

Estimated closing costs:
$3252 (includes appaisal fee, credit report, tax fee, flood cert fee, settlement fee, title endorsement, title insurance ($$$ in my state), recording fees)

Estimated prepaids:
$2886 (includes interest, hazard insurance, city property)

Estimated Loan Amount $223,000
 + Purchase Price/Refinance $225,031 (I'm not sure where the extra $2031 is coming from here???)
+ Prepaids $2886
+ Closing costs $3252
= Estimated total costs $231,169
- Total Loan Amount $223,000
- Lender Credit $278 (-1/8 point being paid to me)
- Home Appraisal cost $460 (paid with a credit card)
= Estimated Cash to Close $7431


So approximately $7431 cash to close. What I am not clear on (and concerned) is that I will need to cough-up $7431 at closing to cover these costs. How can I be sure the closing costs and escrow is being included (rolled in) to the new loan amount? Perhaps I'm missing something or reading this page wrong.

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$3252-460-278 = $2514. Just guessing, but does the prepaids include $483 advance interest?

If so, maybe that's where the number came from. And I'm that case they either will adjust down cash to close (rolling in closing costs to the loan) or they will reduce the new loan amount when they finally send you the final numbers on the last day.  Or they could leave the numbers "wrong" and in that case you should receive a check after close from either your old or new loan servicer.  I'd suspect they just aren't final numbers and they won't update the estimates until day-of closing.

It may also be something different how they got the number ... Your loan officer should be able to EASILY explain it if that's the case.

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I just heard from my lender - the $2031 difference is the estimated payoff amount on the 1st mortgage, which makes me feel better and makes sense.

Does everyone agree that I should be rolling all costs into the closing (and increasing the loan amount slightly) so I can come to the settlement table with close to $0 (or even have a check cut in my favor?) Also, after closing it seems to me I will be refunded the escrow amount at my current lender, which is several thousand.

Scripta has had very good advice so far along the way.

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One benefit of a heloc is you can submit an all cash offer and it will be easier to win a bidding war.

Also for a heloc you only need to show you have enough income for the interest payments. Conventional mortgage is much tougher to qualify for.

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CorradoJr said:   Does everyone agree that I should be rolling all costs into the closing (and increasing the loan amount slightly) so I can come to the settlement table with close to $0 (or even have a check cut in my favor?)You don't need anyone else's opinion on this, form your own. Do you want to (a) borrow as much as possible and pay only the minimum monthly payment, or (b) pay off this mortgage as soon as possible? The answer to this is the answer to your question.

Yes, you'll be refunded the escrow from your current lender.

CorradoJr said:   Estimated Loan Amount $223,000...
= Estimated Cash to Close $7431

So approximately $7431 cash to close. What I am not clear on (and concerned) is that I will need to cough-up $7431 at closing to cover these costs. How can I be sure the closing costs and escrow is being included (rolled in) to the new loan amount? Perhaps I'm missing something or reading this page wrong.
If you rolled it in, your loan amount would be $230,431 and cash to close would be close to $0 (some fees and lender credit will change with an increased loan amount). Or loan amount could be $232,430 and you'd get a check for slightly under $2K at closing.

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