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Need help with deciding whether to refinance
Posted on 4/8/13 at 9:35 pm
Posted on 4/8/13 at 9:35 pm
This is for my father in law.
Currently has a principal left of $91,600. On a 5/1 Arm with current rate of 3.25% for the next 3 yrs, then can go as high as 5.25%, approximately 19 yrs left to pay. He got a quote for 2.75% on a 15 yr fixed. He can pay it off in 3 years, but would like to have flexibility with cash flow. Thanks for any help.
Currently has a principal left of $91,600. On a 5/1 Arm with current rate of 3.25% for the next 3 yrs, then can go as high as 5.25%, approximately 19 yrs left to pay. He got a quote for 2.75% on a 15 yr fixed. He can pay it off in 3 years, but would like to have flexibility with cash flow. Thanks for any help.
2
Posted on 4/8/13 at 9:57 pm to LSUSUPERSTAR
quote:
5/1 Arm with current rate of 3.25%
quote:
2.75% on a 15 yr fixed
need to know closing cost to get a true answer. but, unless he IS going to pay it off in 3 years, it seems like a no-brainer to refinance.
Posted on 4/8/13 at 10:08 pm to LSUSUPERSTAR
A thought would be to shop a 30 year fixed rate, assuming he is able to pay off in 3 years. He should be able to find something in the neighborhood of 3.6 and possibly buy it down another quarter without spending too much. This would give him a payment that would help with cash flow while preventing a future increase in rate.
Also if he has cash on hand to pay off in 3 years, he may be better off investing right now to seek a return >4% . Would be a better use of those funds since a portion of his income is already committed to the mortgage regardless.
Also, if he has equity, a heloc would be a good second these days to help with cash flow. Most banks will pay closing costs on these and the floor rates are now almost as low as a 30 yr
Also if he has cash on hand to pay off in 3 years, he may be better off investing right now to seek a return >4% . Would be a better use of those funds since a portion of his income is already committed to the mortgage regardless.
Also, if he has equity, a heloc would be a good second these days to help with cash flow. Most banks will pay closing costs on these and the floor rates are now almost as low as a 30 yr
Posted on 4/8/13 at 10:23 pm to LSU6262
He is retired and mother-in-law is working a few more years. Closing costs of about $1600.
Posted on 4/8/13 at 10:26 pm to lakeviewtiger
They don't need help with cash flow. Just looking at says to stay flexible and also protect themselves if rates were to start increasing in 3 years. What is the best calculator to use to see some numbers between the two options?
Posted on 4/8/13 at 11:05 pm to LSUSUPERSTAR
I would fix the rate. The savings, especially in years 2 and 3 when the old rate would have increased should offset the closing costs.
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