Refinancing my home again

In 2020, I applied and was approved to refinance my home. I was able to apply $26,000 towards home improvements but was unable to do everything. Recently, I received an email from the mortgage company saying I can refinance and use my equity to complete any home improvements or pay debt.

My question is should I refinance? I’m not sure if it will be worth it since the interest rate increased. My credit score is great, but I still hesitate.

It may very likely not be worth it based on the amount of money you pay for refi and the increased interest rate. Did you cash out equity in 2020?

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Thanks for responding. I paid $500 to refinance. I did cash out and received $26,000.

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Wow, that was quick. Yeah I would say if you or anyone else runs into a refi situation in the future: it’s definitely worth having the conversation and doing the math. If your interest rate is higher and you refi, you might pay a lot more monthly. But you also get a big lump sum upfront which’ll relief stress. I think it depends on the individual whether or not you should refi.

As an example, if your refi means you pay some 3% more each year (say from $10K to $10.3K), but you can take the large lump sum and make at least 5% of your loaned amount each year (i.e. you take a lump sum of $25K and you’re sure that you’ll yield at least 500 bucks out of it), then you effectively have 2% in your spread.

Conversely, if your refi says you have to pay 10% more each year ($11K) but your lump sum can only generate you an additional $500, then you might lose a little money each year.

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Exacting, it was quick, maybe too quick but the market for my neighborhood increased substantially. Your example makes sense. Thank you.

i rent so i have no answers for you, good luck

That’s an interesting scenario that definitely needs consideration. I’m by no means anywhere close to an expert on this. But it seems that the terms of your refi concerning the overall cost (as has been stated) weighed against the return you may or may not get from the renovations is key. From what iv’e read the housing market will remain the same for the remainder of the year and maybe the 1st quarter of next year as well. So it could be a good call to do it. But the devil is always in the details. Look the offer over with a fine fine fine toothe comb and i’d even suggest having another professional look it over. Your local Credit Union would be happy to do that for you. I recently refied in the last quarter and saved about $200 a month. I didn’t want to tap any equity. I’m purposely trying to save as much of the former payment as I can. I wish you well!

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I’d be cautious. Refinancing is quite the rage today, but there are things to consider.

  1. Refinancing resets the clock on the length of time it will take a pay off your home. So, 27 years left in the loan goes right back to 30.

  2. You might be asked to pay one amount at closing and think that is it. Check the fine print. What other costs are rolled into that new mortgage that you don’t pay for at the time of closing the refi? It is like someone saying “I got a free such and such when I bought my…” Trust me, you’re paying somehow and somewhere. They wouldn’t offer the service if they didn’t benefit.

Good luck!