Need mortgage refinancing advice please...

[Roland123]

Currently I have a home that's valued at $240k. I owe $113k. I have 16 years left on a 30-year mortgage at a rate of 5.75% so I want to refinance badly at today's low rates below 3% for a 15-year mortgage. I also have a second mortgage of $25k at a rate of 5.2% that I am considering rolling into the refinance. I also need about $20k cash for home-improvements that are needed badly. ...So I'm looking at the scary thought of a re-finance that would bring my mortgage up to a balance of about $165k. (I have excellent credit.) Just short on cash to where I cannot afford to pay for the home improvements out of pocket, and cannot pay off my second mortgage. Should I bite the bullet and do this?

[disneysteve]

Welcome to the site.

I would definitely refinance. I'm wondering why you haven't done so long before now. Rates have been super low for years.

As for taking out equity to pay for home improvements, that's a more complex question. I'd want to see the big picture - income, monthly expenses, other debt, savings, etc. - before I tackled that one.

[snafu]

Welcome to SA. Are there fees associated with re-fi? Is 3%/15 yr the very best rate available in your area? Have you discussed a re-fi with a Credit Union?

What will proposed loan add to the appraised value of house? Will the home improvement portion be targeted to repairs like roof, water heater, furnace? Is it more focussed on updates like appliances, windows, remodel kitchen & bathrm? What sum will cover cosmetics like landscaping, flooring, painting that are most often part of annual chores during the years you've been at that residence.

[Singuy]

Welcome to SA. Are there fees associated with re-fi? Is 3%/15 yr the very best rate available in your area? Have you discussed a re-fi with a Credit Union?

What will proposed loan add to the appraised value of house? Will the home improvement portion be targeted to repairs like roof, water heater, furnace? Is it more focussed on updates like appliances, windows, remodel kitchen & bathrm? What sum will cover cosmetics like landscaping, flooring, painting that are most often part of annual chores during the years you've been at that residence.

You can also try to find places in which they will roll the fees into a higher interest rate. May not be worth it if you are going to pay this loan off in 30 years, but if you are hoping for a much earlier pay off, then look into it. If anything, even with the higher interest rate from the deal, it'll still be much lower than your current one.

[Roland123]

Welcome to SA. Are there fees associated with re-fi? Is 3%/15 yr the very best rate available in your area? Have you discussed a re-fi with a Credit Union?

What will proposed loan add to the appraised value of house? Will the home improvement portion be targeted to repairs like roof, water heater, furnace? Is it more focussed on updates like appliances, windows, remodel kitchen & bathrm? What sum will cover cosmetics like landscaping, flooring, painting that are most often part of annual chores during the years you've been at that residence.

I can get a rate around 2.89 through my existing mortgage bank or broker. Home repairs are badly needed deck replacement and new gutters, as main priorities. I appreciate any advice. Thanks!

[Roland123]

Welcome to the site.

I would definitely refinance. I'm wondering why you haven't done so long before now. Rates have been super low for years.

As for taking out equity to pay for home improvements, that's a more complex question. I'd want to see the big picture - income, monthly expenses, other debt, savings, etc. - before I tackled that one.

...income: $110k combined gross income, $3000 monthly expenses, $2500 credit card debt, $8000 emergency savings, 18k IRA... I appreciate any and all advice. Thanks!

[disneysteve]

Home repairs are badly needed deck replacement and new gutters, as main priorities.

Fixing/replacing broken gutters should be a priority as inadequate drainage can quickly lead to property damage, basement flooding, foundation issues, etc. If that really needs to be done and you can't afford it, adding it to the mortgage probably isn't a bad idea.

A deck, however, is a luxury purchase. It might be nice to have but it certainly isn't a necessity. I'd be less prone to finance that job. I'd suggest saving up for that one.

[Roland123]

Fixing/replacing broken gutters should be a priority as inadequate drainage can quickly lead to property damage, basement flooding, foundation issues, etc. If that really needs to be done and you can't afford it, adding it to the mortgage probably isn't a bad idea.

A deck, however, is a luxury purchase. It might be nice to have but it certainly isn't a necessity. I'd be less prone to finance that job. I'd suggest saving up for that one.

....I appreciate your helpfulness. My deck is 20 feet off the ground, with 2 flights of steps. it is almost 20 years old, and becoming unsafe with wood deterioration. Will cost at least $10k to replace. More of a safety concern to me than a luxury. I don't have that much cash to pay out of pocket, plus gutter replacement. I already have some water damage too, with possible mold. :-(

Advice?

[disneysteve]

My deck is 20 feet off the ground, with 2 flights of steps. it is almost 20 years old, and becoming unsafe with wood deterioration. Will cost at least $10k to replace. More of a safety concern to me than a luxury.

Sorry, you haven't convinced me.
How much would it cost to just have it removed? A whole lot less than 10K I'm sure. It's a 2nd floor deck so I'll assume it isn't necessary to enter and exit the house. Get it demolished before it collapses and someone gets hurt or it damages the house but there's no urgent rush to replace it.

[Roland123]

Sorry, you haven't convinced me.
How much would it cost to just have it removed? A whole lot less than 10K I'm sure. It's a 2nd floor deck so I'll assume it isn't necessary to enter and exit the house. Get it demolished before it collapses and someone gets hurt or it damages the house but there's no urgent rush to replace it.

Sorry for the confusion... It is the only deck, and only exit on the back of the house from the kitchen. If there were no deck, one would fall from 20+ feet up from the kitchen door if opened. We live on a steeply sloped lot with a giant crawl-space. The house is one-story only. It is just tall on the back side because of the downward sloped lot. Sorry for any confusion.

I appreciate your continued words of advice with my financial situation.

[Jluke]

It is the only deck, and only exit on the back of the house from the kitchen. If there were no deck, one would fall from 20+ feet up from the kitchen door if opened.

do you NEED a deck? as in, is it required by the building code?

if it isn't, then you tear down the old deck, lock the kitchen door and put boards up across the door on the exterior to protect people from accidentally falling. I have seen this with new construction.

and then you start to save money to pay cash for the deck.

[disneysteve]

do you NEED a deck? as in, is it required by the building code?

if it isn't, then you tear down the old deck, lock the kitchen door and put boards up across the door on the exterior to protect people from accidentally falling. I have seen this with new construction.

and then you start to save money to pay cash for the deck.

I have friends who built a house from scratch. The kitchen door opened to a 2-story drop into a sloped backyard. At the time they built the house, they didn't have the money to build the deck, so they did exactly what Jluke said. They locked the door and put boards across it. It stayed that way for about 4 years before they were able to save up to finish the job.

[Roland123]

I have friends who built a house from scratch. The kitchen door opened to a 2-story drop into a sloped backyard. At the time they built the house, they didn't have the money to build the deck, so they did exactly what Jluke said. They locked the door and put boards across it. It stayed that way for about 4 years before they were able to save up to finish the job.

I see your point of view. Is it correct to say that the only situation to add a 2nd mortgage is only when specific home improvements actually increase the appraisal value of the home? (Such as a sunroom, extra square footage added, etc)

Please educate me more... I realize I lose a chunk of equity in this possible situation, and would be paying interest on a deck.. yes. Paying cash is always the best scenario. But what other financial pitfalls am I getting into if moving forward with this re-finacing plan, using the above figures (from my first post)?

[Petunia 100]

do you NEED a deck? as in, is it required by the building code?

if it isn't, then you tear down the old deck, lock the kitchen door and put boards up across the door on the exterior to protect people from accidentally falling. I have seen this with new construction.

and then you start to save money to pay cash for the deck.

In the event of fire, you can not exit the rear of the house? Doesn't sound like a good plan to me.

[Roland123]

In the event of fire, you can not exit the rear of the house? Doesn't sound like a good plan to me.

The deck has a stairwell, for that purpose. But the deck & steps are getting rickety after 19 years now and needs to be replaced.