Refinance or not?

[cvb921]

Good time to refinance? We purchased home in late 2004 with Mother in law so she could live with us, for 685K with 150K down. House value down about 150K- 160K. We have an ARM at 6.25% due to reset on 8/2011. M-I-L wants to refinance and put more cash down (part of our inheritance) to reduce payment before loan resets.

Given that home values have still not hit bottom in our area (Reno, NV) IMO, is this a good idea? Spouse and I feel better bet with this money is to pay off our other debt rather than put it into mortgage right now.

[b4freedom]

It really depends on the math and what you’re goals are. It never hurts to find out what you can refinance at and then do the math. Also, by refinancing you can free up additional cash to pay off other debts. The risk of not refinancing is that if house values continue to drop you may not have enough equity to refinance and then you’ll be stuck with higher interest rates in the future.

You didn’t provide enough information to really help you out with the numbers. So, I’ll make some assumptions. I’ll assume that your monthly payment is around $3294 (based on a 30 year term on a $535k loan at 6.25%). If you paid down another $100,000 and refinanced $435,000 @ 5% (I have a rate lower then that) over 30 years your monthly payment would be about $2335. You would now have $958 per month to apply to other debt.