Financing Gurus: Refinance home mortgage now?

Question

Dear BP Family:

While working on financing for a deal, that unfortunately, I was outbid, I am considering refinancing my home mortgage.  Don't know if now is the right time or should wait because of Fed activity with rates lowering.  Scenario is 70/30 LTV 8 years into the mortgage on a 30 year fixed note.  Options I saw were 15 year fixed at 3.3625 no points or fees.  Is this a good idea?  Monthly payment amount isn't important to me.  What does the more experienced crowd think?  Thank you as always!

Shaun Weekes · Answer

Ok, so you're just looking to do a rate and term refinance to lower the interest being paid over time.  Because your current rate is so high the difference is not that much.  That's a great idea especially if your new mortgage term is shorter than what you have currently left on your current term.

Just make sure you crunch the numbers and plan ahead DTI wise.  Especially if you're going to start buying and holding.

Jonathan Jaffe · Answer

Thank you @Shaun Weekes for your thoughts.  My original idea wasn't to cash out anything but to lower my interest rate.  Right now, the payments would differ by a matter of less than $100 monthly due to my higher rate on the original note. The re-fi puts me on track for paying almost the same amount every month but more going toward principal.  I would take out a re-fi loan for only the outstanding principal, leaving the 70-30 where it is.  In my mind, I'd be reducing the time to amortization without incurring a substantial obligatory monthly increase in payment.  I'm of course new at this and admit I may be looking at it from the wrong angle.  That said, I'd want to leave my paper credit history as good as it is (score is over 800)  and don't know the extent of a re-fi on my home loan with the prospects of finding another property to bid on.  Plan for that is to pay cash and then BRRRR.

Thanks again for your thoughts!

Shaun Weekes · Answer

I would recommend a 30-yr. fixed and here's why.  If payment isn't an issue for you just pay more every month on your mortgage.  This way you can control whether the home will be paid off in 30 yrs., 20 yrs., 10 yrs. or whatever.  The reason behind this is on paper you want to show your DTI as low as possible so that you can qualify for more homes down the road.  Amortizing your loan over 30 yrs. is going to be your lowest payment option.

Are you refinancing to buy cash or just put down more money?

Also make sure that you've been pre-approved so that you know what you can afford on paper.  This is extremely important and gets overlooked too often.

Take care and have a good one.