Are there benefits to refinancing while taking cash out?
Posted by admin | Under Cash Out Refinance Monday Oct 20, 2008I refinance I would reduce my monthly payment by 160$, some of that is removing PMI and some is a better rate. at the same time I was going to take 5K out to payoff CC bills. I figure by doing this I could free up appx. 413$ a month total. I only plan to be in the home for another 2.5 yrs and my closing costs are going to be around $1000.00.
So my current payment of 920 which includes PMI, would be reduced to 757 with a 5000 cash out.
So does it make sense (I'm in about 5000 CC debt at about 250 min. payment a month). Any help is appreciated.
As long as your true closing costs are $1000 it would be beneficial. Were you told that your closing costs are only $1000 or have you seen actual paper work that says they are $1000.
Considering that you only plan to be in that house for another 2.5 years, you would not break even on the costs if the closing costs are more than $4890.
I do not count the savings on your credit card because unless you change your spending habits, you are most likely to continue to use the card, so that is not a guarantee savings.
Cashing out could be a potential problem depending on what you do with the cash since it involves increasing personal debt.
Using the cash to pay down existing credit card debt is a viable option but realize that the temptation will be to pull out more cash than is necessary during the refinancing. Then you'll be stuck with the original credit card debt balance (now transferred to your new equity loan balance) plus your additional debt from cash not used to pay down the debt.
Also, if you only plan to be in the home an additional 2 1/2 years check to see if there are any early payment penalties built into your potential new loan.
References :
As long as your true closing costs are $1000 it would be beneficial. Were you told that your closing costs are only $1000 or have you seen actual paper work that says they are $1000.
Considering that you only plan to be in that house for another 2.5 years, you would not break even on the costs if the closing costs are more than $4890.
I do not count the savings on your credit card because unless you change your spending habits, you are most likely to continue to use the card, so that is not a guarantee savings.
References :