WWYD-mortgage refi and deck

[flygirl]

Considering the advice I just gave someone else, I likely know the answer to this question.

We have about a 4 1/2 month e-fund right now and then a little money in another savings account that really isn’t earmarked for anything.

H wants to build a deck and possibly with a screened porch.  I do also, but I think we should put it on hold until next year at minimum because the uncertainty of everything going on plus I could lose my job or have to take a pay cut by October.  Right now they’re telling us we don’t have any lay offs on the horizon and we get super busy in Oct.  However, that’s heavily contingent upon the general job loss in the US.  H and I make roughly the same amount so this would be a hit.
(ETA-it would be very hard for me to find another job for awhile due to the specialty industry.  H carries our health benefits but he’s have to add dental as I carry that)

To build the deck/porch: We would refi our current mortgage to a shorter term than we’re on now and take out $15K for the other 1/2 of the cost of the deck/porch and have the same mortgage payment we have now because of the lower rates.  We’d still be under 80% LTV.  

Our original intent was to cash in some company stock I have-but it’s now worth 1/2 of what it was before.  I really don’t think this is going to recover before the end of the year or maybe not into next year but it’s still worth about 6K right now which I could use for E-fund money too even though it would suck.

give me your opinions.

please don’t quote

[Pom]

Too many uncertainties. I wouldn't.

[marie]

I would not sell stock right now at 50% of the previous value. Cash out refis have higher rates than a straight refi. Did you get quotes? They also require appraisals generally with cash out.

I would table this for year if you feel your job may not be stable unless you can comfortably live of your H's salary alone.

[k3am]

For a "nice to have" project? I would pass. At least in the short term until we have a little more idea of how this all plays out.

I definitely wouldn't do it if meant cashing out stock at an extreme low.

I might spend the time dreaming and making plans for what I'd want that deck to look like so I'd be ready to go once the dust settles.

[flygirl]

May 6, 2020 10:36:08 GMT -5 marie said:

I would not sell stock right now at 50% of the previous value. Cash out refis have higher rates than a straight refi. Did you get quotes? They also require appraisals generally with cash out.

I would table this for year if you feel your job may not be stable unless you can comfortably live of your H's salary alone.

Yes...the quotes are generally 1/4-1/2 point higher but most places say they require an appraisal either way 

[mich1]

Nope. Not for something like this right now.

We signed a contract to have the house resided. There were some rotten places in the siding, but we did not need to do it now. DH had just started a new job, where they were going to need him for the next 3 years, then he was planning on retiring (this was our last major home repair we needed to do).

They started ripping the house apart, then the virus hit. A week into it, the stay at home order came down. Despite DH working from home, he got laid off effective 5/15. To avoid selling declining investments, we emptied both my bank account and his to pay for the $50k siding job thinking we could use his job to refill them. The timing really sucked on this for us. We are financially ok, but I’d feel better having more liquid money right now.

Luckily, the house is paid off and our expenses are pretty low.

[simpsongal]

Have you researched loans? When we looked into options for funding some projects we found cash out refinance options were not great. That may have changed, but a home equity line of credit turned out to be the most economical option.

How stable are your jobs?

[flygirl]

May 7, 2020 13:53:57 GMT -5 simpsongal said:

Have you researched loans? When we looked into options for funding some projects we found cash out refinance options were not great. That may have changed, but a home equity line of credit turned out to be the most economical option.

How stable are your jobs?

This is actually sage advice.  We got a really good rate to refi our mortgage at the current balance and even with a slightly higher home equity rate, we’ll save money and also get it paid off faster and not have the deck for the full length of our mortgage.

[sdlaura]

I personally wouldn't refinance to a shorter mortgage - rates are so historically cheap, and there is no prepayment penalty for mortgages, so why not borrow more money at low rates for longer if you're going to refinance? This is assuming that you are generally responsible with money and wouldn't need a shorter mortgage as sort of a forced savings strategy.

We currently have a 3.75% rate and have all our docs in so that if rates drop below 3, we can refinance. Our plan is to take $ out and just leave it in cash in the bank, just in case DH ends up losing his job, which is a possibility. If all is well and our cash flow remains the same, we can always apply it to the mortgage in the future.

[flygirl]

May 8, 2020 11:37:12 GMT -5 sdlaura said:

I personally wouldn't refinance to a shorter mortgage - rates are so historically cheap, and there is no prepayment penalty for mortgages, so why not borrow more money at low rates for longer if you're going to refinance? This is assuming that you are generally responsible with money and wouldn't need a shorter mortgage as sort of a forced savings strategy.

We currently have a 3.75% rate and have all our docs in so that if rates drop below 3, we can refinance. Our plan is to take $ out and just leave it in cash in the bank, just in case DH ends up losing his job, which is a possibility. If all is well and our cash flow remains the same, we can always apply it to the mortgage in the future.

I’m going to disagree slightly with this-reducing the term and getting a lower interest rate will save us $40K+ over the life of the loan, but yes, having extra cash and the low payment would make me feel better if I lost my job.  But mine is probably 60/40 right now so I’m going to bank on that (hoping it doesn’t bite me).
If you can get a rate at or below 3 for a 20 or 30 year term, you have to send me a message though!  I’ve seen 3.5% for a cash out 20 year unless you want to pay points, which I don’t.

[sdlaura]

flygirl I think most people should make more than 3.5% long term on investments, so it makes sense to make money there with our extra cash, rather than the smaller savings on a shorter loan. And I really value liquidity/optionality. But for someone who isn’t investing/wants forced savings, a shorter loan could make sense.

My parents and sister were just both able to lock in 3.125% on new 30-years. Mortgage rates are super out of line/higher than other rates right now and DH and I and a lot of our investment industry colleagues think they will merge down toward other rates at some point - fingers crossed!