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Refinance home question

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  • Refinance home question

    Currently we have a small condo in HCOL (aka NYC) 330k, 30 year (one year in, future hubs recently refinanced to pay for large expenses), 4.25%. Place is worth at least 700-750k, possibly more.

    Could likely refinance to a 15 year at 3%. Would raise monthly payment by about $400-600. Value will keep increasing. Currently in a "hot" area in a good public school district.

    The dilemma? We are not sure how long we will stay in this condo. Min- 5 years. The elementary school is actually good so we may be able to stay here for 10 years or more. My thinking is we should refinance no matter what because we will get more equity into the condo/pay it of faster.

    We are not sure if we are going to sell it or keep it (would provide a nice rental income for us in retirement for example - or something we can pass to kids). If we don't sell it- we wouldn't have much for a downpayment of future home then....

    I guess the question is - is there any reason NOT to refinance it?

  • #2
    Lots of variables in play. Probably better to refinance if you can handle the higher payment (eg no student loans at 6%, etc). I'd plug the numbers into the mortgage professor's refinance calculator. That should give you your answer if you have all the numbers.


    • #3
      My very loose general rule is to refi only if you'll own the home for at least another 5 years and you are not adding to the length of the mortgage. You meet that criteria. W/o knowing more, and, of course, assuming refi costs are competitive, I would lean toward doing so. The rest of the facts/possibilities are fairly irrelevant, imo, if you can afford the higher mo. pmt.

      EDITED to add: You are near the top of the free pass of $250k per spouse LTCG (once you marry). Just keep that in mind - there are not many tax-freebies today. If you decide to convert to rental, would have 3 years to sell after you move. It would be very difficult to justify keeping a property and forgoing that kind of tax-free gain unless you decide to pass through your estate (stepped-up basis). And there is no guarantee that laws won't change. A bird in the hand...
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


      • #4
        I assume that you have checked a mortgage calculator.  If you can afford the extra payment then it is really a no brainer.  My house is paid off but I refinanced a couple of times down to a 10 year and made extra payments to get it done.  I think buying and selling houses is aroyal pain so it might make sense to get the capital gain but weigh your time and the property's convenience and other intangibles.  I have kept my house 20+ years because it is so close to the hospital (less than a mile) that I could sleep at home doing Ob. Priceless.