Refinance or Pay off Debt

4 Replies

Hi guys got a question related to strategic planning.

Our goal is to get down to a single income to improve quality of life.    One of the options for accomplishing this goal is I am looking at refinancing our personal home to alleviate stress on our monthly budget.  With 2 incomes it is not much of  burden, but is a little much to cover with only 1 income.

We are currently at about 50% ltv on our personal home.  6 years into a 15 yr mortgage at around 3%     If we would refi into a 30 or 20 yr this would cut our payments into half.  Decreasing our monthly expenses by about 20%.   However I ran the numbers out in a 20 yr projection.  Vs keeping the mortgage and investing heavily after its payed vs refinancing and investing the remainder.   The math says to keep it the way it is by investing our full mortgage payment after our mortgage is paid off we would amass a nice sum of money in 20 yrs about 500k more then refinancing.  However I think it would be unlikely we would both keep working after the mortgage would be paid off.  Also we don't see this as our forever home, so there is that.  Refinancing now while it is our personal home would give us a good rate and would cash flow nicely after we move out.  

 We are in our mid 30s and I think that refinancing would move us closer to our goals our monthly payments would be reduced significantly. However I am not a fan of holding lots of debt and try to manage risk.   On the other hand having lower payments would seem to lower risk.  Lots of factors at play.  Not really sure what to do.   Looking for any advice or opinions on what to do here.  

I assume quality of life means more time with the little one in your picture. I've been considering a similar proposal but with my truck loan. Its refi and relax or keep grinding to pay off early. 

I would run the numbers on the refi at 30 years. Interest rates are low and may keep dropping. If you can get the same rate you have now on a 30 year, why not? You can always keep paying what you do and pay it off early but the lower minimum payment gives you flexibility. You could make double payments when work is busy and minimum payments when you take time off, or whatever. The idea is you have options. Hope this helps!

Either option is fine and depending on PMT vs income has the risk is low. A couple other options for you: sacrifice and pay it off in 3 or 4 years instead of 9. Sell the house now and use your equity for a down payment on a house you like more that is affordable on one income and use some of the equity for a down payment on a rental. Another thing you can do is increase your w2 income for whichever one of you will stay in the workforce. If it was me, I would tell my boss that I want my wife to stay home and what do I need to do to get a $10k raise in the next 90-180 days. I would also pay off the loan in 3 to 4 years because I am a conservative low debt guy and want my wife home with the kids. But all options are fine and good options.

Thabks for the tips.   I am a low debt guy as well. However I think paying it off earlier will hamper my ability to invest and grow other income producing assets.   Were at about 50% ltv on the property which is a great defensive position.   I also dont know that I want to pay it all off because I dont plan on staying here long term.  I feel like if I would pay it off.  I would end up refiing the money out to purchase something else with so whats the point?

Anyone else have any opinions?  Still struggling on figuring out what to do.   I wonder if a wait and see approach would be best. If rate continue there downward trend, it may pay to wait a little longer?

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