“I always appreciate these kinds of Questions”
Joe
I am guessing that you have done this calculation so many times that you
know the answer off the top of your head. A client of mine asked my
advice, what should I tell him? He has already been advised to
refinance, but if you agree I will send him your way.
Homeowner has a 30 year mortgage that is in its 15th year at 4.25%. They want to borrow another $100,000. Current balance on first is around $290,000 and FMV is estimated be well over $600,000.
Homeowner may move in 3-5 years, but is unlikely to move in less than 24 months. They were looking to add a HELOC. I thought that refinancing to a rate below 4% would be cheaper. But then the question was raised, is it worth paying extra points to bring the rate down ever further. My guess was that the extra points to buy down the rate would not make sense with less than a 5 year window.
Refinancing for a client in this situation would be crazy. Spending the money for
closing costs for such a short time period would make NO sense.
I recommended that the client arrange for a home equity line for the
funds that are needed and there would be no closing costs. One
additional benefit is that 15 years into a 30 year mortgage means lots
of principal pay down with each additional mortgage payment that is
being made.
What advice would you have given?
