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I need advice from all you CR experts out there. If we’re managing to get by but barely, and in the next few years might have some very large expenses (hopefully for good reasons), does it make sense to change our 20 year mortgage to a 30 year mortgage, take out as much cash as we can and keep the payments the same as we have now, so we can take advantage of the low interest rates?
If you can refi at a lower rate, then I would do so regardless of your other concerns.
I believe the banks are extremely cooperative in better financing now since market values and rates are lower. If you call your bank and say that you are having a hard time making your payments, they may be surprisingly cooperative in a refinance offer. There are also several programs available for homeowners having difficulties in paying mortgage – just call your bank and say that you are struggling to make payments due to difficult economic times.
You should probably check into a home equity loan / line of credit and compare the initial costs, tax ramafications, and terms of repayment vs. a refinance to see which best suits your needs.
If you are getting by just barely, who says you have to make those big expenditures in the future. Why would you want to finance todays groceries for 30 years.
Abba: not necessarily. There are often closing costs involved that you have to take into consideration also. It may not pay to go to a lower rate if the closing costs are high.
I am in the process of refinancing and one of the things they asked me was for a letter explaining what I intend to do with the cash I am taking out. It sounded strange to me but it seems they are very careful these days about giving loans and want to make sure you are not strugling and need the money just to stay afloat.
By the way, in my case, I am just planning some home improvement projects and that answer was good for them.
Changing to a 30 year mortgage will slow down the payment of principal considerably, due to the amortization of the payments (i.e. for the first couple of years you will be paying primarily interest and relatively little principal). However, changing it from a 20 to a 10 or 15 year mortgage (with potentially the same monthly payments due to the lower rate) will cause you to pay off the principal much faster, thus allowing you to take out another mortgage or line of credit when you think you’ll need it down the road.
Don’t take this as advice. Just pushing in a thought there for you to think about…
Dear OP, I quotes your statement above, “I need advice from all you CR experts out there”
I am deeply offended. This implies that some coffee room members may not be experts. Anyways I believe that if we are not experts, why would you be coming here for advice instead of going to a professional. The very fact you came here in the first place hows that you trust us with your most important decisions, such as those affecting your family and home.
Sorry I just had to get this off my chest. I do realize that you are no closer to knowing what to do about refinancing your home, after reading this!
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