15 year VS Buying a second house.

[Felipe Diaz]

Hi Everybody,

I currently have a house in Los Angeles, I owe 250K right now. My house appraises around 400K. I am not happy in this community since the school districts are really bad and i had a few brake ins.

I have a goal of paying it off soon so I am in the middle of refinancing to 15 years and my payment will go up to $2,220.00 (3.3 rate) from $1660.00 at (4.0 rate). I will be  paying $560.00 more per month.

My other option is not selling the house and buying a second house. The big issue is that I don't have a lot of money saved up and I know that to buy a decent house in LA will be really expensive.

Any advice?

Thanks,
Felipe

[Matt Slakey]

Because 3.3% is such a good interest rate, you could just apply the extra $560 a month to what you are paying now. Typically there are fees with refinancing, which would eat away at your savings. Paying an extra $560 a month lets you pay off 250k in 16 years 4 months, pretty close to your goal (it would have to be about $670 extra a month to meet 15 years). Plus not committing to the new payment will give you flexibility if you need money for an unexpected expense.

As far as getting money for a rental, I would look into a HELOC. The amount available is based on your equity.

Another option would be to save up that $560 or $670 per month, preferably in an interest-bearing account.