Refinance Situation

[fsa3]

Hi,
I have about 240k left on a mortgage that I'm paying 5.625% on. I plan on selling in about 2-4 years. Whenever I get extra money a put some towards paying down my principal (and some into other investments).

Given the lower interest rates I was considering a 5 yr ARM as I'm 99% sure I'll be selling my home before 5 years. However I'm not sure the lower rate will be worth it based on closing costs - any thoughts on if this makes any sense?

Thanks.

[disneysteve]

It probably doesn't make sense. To be sure, you need to get a good estimate of closing costs and what the new payment would be to figure out how long it will take you to recoup the costs.

As a side note, I probably wouldn't be paying extra on the principal if I was planning to sell in a couple of years.

[fsa3]

W/ respect to paying down the principal - why not? I look at it as a 5.625 guaranteed return (well more like 4% b/c of tax deductions). That said I dont know where else I can get a guaranteed 4% return.

What else would you recommend to do with some extra money?

[jIM_Ohio]

W/ respect to paying down the principal - why not? I look at it as a 5.625 guaranteed return (well more like 4% b/c of tax deductions). That said I dont know where else I can get a guaranteed 4% return.

What else would you recommend to do with some extra money?

Liquidity when moving is better than return on money between now and then in many cases.

Is 4% return going to change the house you buy? Meaning 4% of 10k is $400. Is that $400 going to get you a better house when you move?

Will you need access to liquid cash as downpayment on next house before you sell this current house?

If your plan is to sell current house, then rent, then save for new house, then buy bigger house, paying down mortgage makes some sense

If your plan is to buy new house, sell current house and move from old house to new house, the liquidity of money (Having it available for the high expenses associated with moving) makes more sense (to me).

[fsa3]

That makes sense to me, but that is why I don't use all the money to paydown, I keep some other money liquid in other investments and even savings (boo) account.

[jpg7n16]

W/ respect to paying down the principal - why not? I look at it as a 5.625 guaranteed return (well more like 4% b/c of tax deductions). That said I dont know where else I can get a guaranteed 4% return.

What else would you recommend to do with some extra money?

That is exactly how I look at it. I personally see no problem paying extra on the mortgage.


There are some options out there - like NBH Neuberger Intermediate Muni, closed-end funds, quote, price - Morningstar

Muni bonds are tax free - so tax adjusted is a bit higher on that ETF at the moment than on your home. NBH = 5.3% tax free; mortgage = 4.21%ish after tax deduction (25% tax bracket)