Refinance from a 15 yr to a 30 yr??

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Refinance from a 15 yr to a 30 yr??

Postby KateWinston » Mon Apr 01, 2013 7:12 pm

My husband and I purchased a home last May with a 15 year mortgage. We were both in line for $12K raises this past February, but neither came through, so aside from 10% for our 401Ks, we are pretty much paycheck-to-paycheck. I appreciate your help

Two incomes combined = $129K/yr
Mid/late-20s, no kids
One car loan = $7K at $295/mo for 2 more years
Home Depot CC at 0% = $2300
No other debt
Current value of home = appx $375-400K
Current lien value = $310K
Purchase Price = $350K
15 Yr Conv. Mortgage at 3.5%
Total payment per month, incl. insurance ($40), PMI ($209) and taxes ($375)= $2900ish
HOA = $100/mo
Retirement savings (401Ks and Roth IRAs) = 65K, and saving 12-15% per year for retirement

and here's the problem...

Checkings and savings = $4K!!!

I am optimistic that one of us will get a raise soon, but it is so stressful living paycheck-to-paycheck despite having a healthy income between the two of us. I really enjoy paying off the house quickly, and we would like to make it into a rental in a few years, but I want to make a career change, which would require a pay cut. The other issue is that my middle credit score is only 720 (my husband's is much higher).

So do we refinance to a 30 year? Or do we tough it out with the 15 year? OR do we sell it (the market is hot and our house is beautiful - I think we could get $400K) and start renting again to relieve the stress? Thank you all in advance for your advice!!!!

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Re: Refinance from a 15 yr to a 30 yr??

Postby smithson1 » Mon Apr 01, 2013 7:53 pm

You spent too much on your home. Sell the thing and buy something within your budget.

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Re: Refinance from a 15 yr to a 30 yr??

Postby partgypsy1 » Tue Apr 02, 2013 6:43 am

OK, I can't tell if the 129 is pre or post tax. What percent of your take home income goes to housing? The rule I like is the one Warren uses, with 50% going to fixed or recurring expenses (this includes mortgage, utlitilites, phone, basic groceries), 20% to spending and 20% to saving.
See if changing from a 15 to 30 really even saves you much, after taking in the closing costs and having to pay more in interest.

Also and maybe I'm the minority here, I see a house is primarily a place to live in, not as an investment. So why did you buy this big beautiful home, and already you are thinking of renting it out? Just buy the house that you would be happy to live in, that is within your income, and invest the rest of the money. Or if you want to buy investment property, treat that separately, otherwise you may buy more house than you need, fooling yourself it is some kind of investment.

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Re: Refinance from a 15 yr to a 30 yr??

Postby DaveInPgh » Tue Apr 02, 2013 8:08 am

I also agree that you spent too much for your house. If you are not willing to sell and buy something within your means, I would suggest only contributing to your 401k up to the company match (if you do receive one). Put the difference toward building your emergency fund.

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Re: Refinance from a 15 yr to a 30 yr??

Postby TCstr8 » Tue Apr 02, 2013 2:17 pm

Not going to judge whether you bought to much, will just provide some numbers

Realistically you could look at a 30 year fixed in the same ballpark as the 15 year rate you have. Not knowing what State you are in, running some very basic numbers gives me:

$312,500 loan amount
$380,000 appraised value (82.24% LTV)

3.625% on a Conventional 30 Year Fixed
New Payment: $1840.16 (includes $40/month for insurance and $375/month for taxes)

Estimated Closing Costs: $2725
Estimated Prepaids (to setup new escrow accounts): $2975
APR: 3.858%

With this scenario, instead of paying monthly for mortgage insurance, you could opt for a SINGLE PREMIUM mortgage insurance, which cost you about $3700 up front, but then you have no monthly mortgage insurance.

Now, you could pay the 15 year payment when you can, or opt to fall back on the 30 year when money is tight.

**Disclaimer** the above are ONLY ESTIMATES, and is only valid in Ohio
T.C. Strait
Ohio Loan Officer / Manager @ Mortgage Broker
NMLS ID 164070

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Re: Refinance from a 15 yr to a 30 yr??

Postby RayinPenn » Wed Apr 03, 2013 1:30 am

Agree with TC refi the house if and do the beans and rice thing and eliminate that credit card. Your current mortgage is way too high and you have no emergency fund!

You can pay down the mortgage with extra payments when you have a emergency fund set up and eliminated your consumer debt.

You can do this ...

“If you tell the truth, you don't have to remember anything.”
― Mark Twain

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