Using equity to lower mortgage payment

3 Replies

I'm looking to get some feedback from the bigger pockets community. I am currently in the process of planning a large renovation that will include new kitchen, master bath, dormers, and an inlaw apartment. The renovation will be funded in cash. After the renovation I will have quite a bit of equity in my home. I was looking to see if there is a way for me to use that equity to lower my monthly mortgage payment. Thank you in advance for the feedback.
Originally posted by @Ralph R. :
I'm looking to get some feedback from the bigger pockets community. I am currently in the process of planning a large renovation that will include new kitchen, master bath, dormers, and an inlaw apartment. The renovation will be funded in cash. After the renovation I will have quite a bit of equity in my home. I was looking to see if there is a way for me to use that equity to lower my monthly mortgage payment. Thank you in advance for the feedback.

 Hi Ralph,

If you currently have PMI, dropping it could certainly be done via that equity.

Occasionally, someone says to me "I'm going to own this house forever, I will never sell it, I am certain that I will never refinance it after this," in which case multiple discount points to  buy the rate down to something ridiculously low can make sense.  You can finance this into your loan balance using equity, without having to pay anything out of pocket. Typically your payment will be lower even though your mortgage balance goes up, which is fine if it's a property you will never sell or refinance. 

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

How are you planning to get the cash back out that you spend on the reno. You need to pull the equity out to reinvest in other properties. The dead equity will cost you more in lost opportunity income than it will ever save on a mortgage.

Your primary goal should be to make money not save money when you have dead equity wasting away.

@Ralph R. I don't know about your personal situation but when I bought my primary residence there was a rate cut if you were "Super Conforming" so I put enough down to get that slightly lower interest rate.  I know some of those conforming vs. super conforming vs. jumbo classifications will vary but it can't hurt to have a conversation with a couple of mortgage brokers about it.  So given it's a bit of a "moving target" you might want to see where you end up at.  There's a small chance it might be relevant but it never hurts.

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