Fiscally responsible decision with my mortgage?

[dja4260]

Currently have a 30yr mortgage, APR 4.25% 5% down, owe $223k, only 4 months into it. We did a complete remodel ourselves. My realtor said the house should/would appraise or sell for 340k+. This was our plan, so where thrilled with the equity.

We OWE 40k in student loans @ 6.8% interest. This equates to $600 per month for the next 15 or so years.

We're in the process of a 15 year refinance. As you see this "cash out" increases my monthly payment roughly $300 per month. However cutting the $600 in monthly dept leave me with $300 in surplus.

Am I missing anything or is this a no-brainer? See mortgage montly cost below. I'm 30 and we want to be out of dept ASAP.



40k cash out
15yr $1800 2.875%
20yr $1530 3.6%
30 yr $1200 3.5%

No cash out
15yr $1520 2.875%
20yr $1270 3.3%
30yr $1000 3.5%

 

[dja4260]

The cash out would pay off our student loans. failed to mention that.

 

[PandaBear]

That's a no brainer to me as long as it is a no cost refi (i.e. slightly higher interest rate and no one time out of pocket cost).

 

[dja4260]

The refi will cost 1k that will be rolled into loan. It would take 7.5 years to break even with the higher rate for the zero refi.

It seemed like the right thing to do. Thanks for your input.

 

[hattaresguy]

Do the cash out 15 year loan and pay off the student loans.

Also remember student loans are the worst kind of debt, it will literally follow you to your grave. With any other kind of debt you can get out of it and start over if you had to.

A 15 year mortgage will be paid off when your 45, which will give you another 20 years until retirement age to continue saving.

 

[JayhawkRoy]

The math looks pretty good. Keep in mind that the bank's appraisal may come in lower than the agent's estimate. I have seen that happen in the past. If you can get past that situation, you will save quite a bit by paying off the student loans.

 

[HTSS_TR]

I would go with 15 year with cash out to pay off student loan, invest the $300 extra to a mutual fund for future and for emergency.

Make sure that you don't have to pay PMI(Private Mortgage Insurance), if loan to value is more than 80% then you should pay more each month and when it is down below 80% inform lender to remove PMI.

 

[Tdbo]

Originally Posted By: HTSS_TR
I would go with 15 year with cash out to pay off student loan, invest the $300 extra to a mutual fund for future and for emergency.

Make sure that you don't have to pay PMI(Private Mortgage Insurance), if loan to value is more than 80% then you should pay more each month and when it is down below 80% inform lender to remove PMI.


+1. The math looks fine and it should save you quite a bit compared to the rate that you are paying on student loans.

I would take the extra and either divert it to a good mutual fund and/or a combination of investment and paying extra on the principal. With that rate,I 'm not sure that there is a huge rush to beat down the principal.

 

[zrxkawboy]

Originally Posted By: Tdbo
The math looks fine and it should save you quite a bit compared to the rate that you are paying on student loans.


I agree!

 

[Jimzz]

As said and I agree if you can afford the 15year do that with cash out and pay the student loans off.
Student loans are also almost impossible to discharge in bankruptcy so if something bad really happened getting them paid off would offer a little more protection as well.

Me and my wife are going to finish paying off our house this year. Down to 45k as of last month.

 

[otis24]

You could put part of the $300 per month you save, any amount will help, towards the principle of you home loan to pay it off early. Thus, saving yourself additional intrest in the long run.

 

[benjamming]

Student loans are simple type aren't they? Not as much interest paid in total if so.

Mortgage is not that way with A LOT of interest especially on the front-end so take that into account when deciding about refinancing. The front-end heavy interest curve starts over with every new loan. Total cost of new loan - cost of old loan.

 

[hattaresguy]

IMHO at 2.8% I wouldn't pay an extra penny on that loan, carry it for the full term.

Invest the extra money you can do better with it.

Your houses value is independent of what you owe on it.

 

[hattaresguy]

Originally Posted By: benjamming
Student loans are simple type aren't they? Not as much interest paid in total if so.

Mortgage is not that way with A LOT of interest especially on the front-end so take that into account when deciding about refinancing. The front-end heavy interest curve starts over with every new loan. Total cost of new loan - cost of old loan.


Ehh these days with inflation money is pretty much free, so the old advice of pay it off fast doesn't really apply. Back in the days of 14% mortgages absolutely, they are front loaded and your going to pay a fortune in interest. But today with most notes being sub 5% just pay it, you can do better elsewhere with the extra money.

Student loan debt is the most dangerous kind, it will literally follow you to the grave. I will always advise someone to ditch it if at all possible.