Can you help me analyze a refi?

3 Replies

Hey y'all

I'd love some input on a refi I'm currently doing. 

Here's the skinny - 

Bought a fixer upper 1 yr ago for $60k. It was assessed at $85k. I know that's not a good gauge of value, but it's what I had at the time. 

I've put $28k in repairs, spent $13k on Mortgage payments (thats down payment, mortgage and interest combined), and some other expenses like placement fee's, etc. 

All in I'm at $51k expenses. Now I'm refinancing (long story short I was privately financed by the former owner at 6% and he was charging me $500/mo....250 principal, and 250 interest, so I needed to finance with a bank and wanted to lock into a lower rate since they are shooting for the stars right now). 

I had initially wanted to refinance at $55k (enough to pay off the remainder of the mortgage and cover the closing costs). 

BUT

After the appraisal came in at $105k...I decided to refinance at $73.5k to pull out some of my cash. 

Heres the main questions---

They are charging me a higher rate now to do a cash out refi instead of traditional refi (i guess, idk how they're different)...to the tune of about $3k. SO, doing a cash out refi I will be sacrificing about $3k to pull out $15k. 

Is it worth it?? Am I missing something?

Cory

@Cory Melious without seeing the "fee worksheet" or "loan estimate" I'll need to make some assumptions but I think I'm on the right track at least.  In general, taking cash out carries a higher interest rate.  Sometimes about .5 of a point higher.  But if you want to keep the same rate, then you would just buy in down in the form of "points".  So if your fees are higher, but your rate is the same as before, this sounds like what has happened.  Does this sound like the situation you are in?

Andrew Postell, Lender in Texas (#392627)
817-873-0621

 I looked them over and neither of them have points, but instead they have different origination fees. I gather those are fees charged by the bank for a loan, but I don’t understand why they’d be so dramatically different on a loan that is only $20k different. 

@Cory Melious yeah, origination fees are just like points but have a different name.  Mortgages are so confusing sometimes.  But I feel that is the reason why - because you are getting cash out they charged you extra fees to keep the rate the same.  That's my feeling at least.

Andrew Postell, Lender in Texas (#392627)
817-873-0621

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