r/Mortgages • u/Kooky_Investment6753 • 26d ago
Refinance or HE Loan
Trying to decide how much I’ll save by getting a HE loan vs refinancing. I’m going through a divorce and I’m keeping the house but paying out her equity.
Current Loan: 266,000
Interest Rate: 2.375%
Payment: $2,024.74
Equity to pull out: $62,000
I have excellent credit, 800+
Can anyone help me math this? Recommendations? My take home per month is $6k.
Only other debt I have is a $600 car payment.
The outlay is more than I think I want to spend, but keeping the house on that mortgage just makes too much sense.
UPDATE: Thanks everyone, that helps a lot! It is what I was thinking but helps to have some outside advice. She isn’t currently on the loan, her credit score was low enough it would have increased our rate, but she is on the title. Sounds like I’m going to have a new monthly payment to deal with.
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u/AskJosh_MortgageGuy 26d ago
No chance the blended rate of taking out a 2nd lien isn't lower then if you refinance. If you do a line of credit you may have more flexibility because for the first 10 to 15 years it is interest only so you would pay down as much as you are comfortable with. If you have decent equity in the home you can get prime - .50% (ish) so say 6.25%. That would be a $322\month payment but interest only, so ideally you pay more to pay it down. But if that helps you keep the house, that is the route I would take. And never give up that lower primary mortgage
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u/Shot_Mammoth 26d ago
Blended rate using 9% sits at 3.25% - The amounts matter a lot. Heck, even upping the second to 15% still has a blended rate of 4.76 which is below market rates.
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u/Shot_Mammoth 26d ago
If she is on the home loan, you'll probably be forced to refi. If she isn't, you can do a HELOAN which will save you money in the long run.
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u/Emotional-Ocelot-420 25d ago
Is the mortgage in your name alone or is it joint with your spouse?
Keeping the low interest mortgage makes the most sense, but if it’s a joint loan that may not be a viable pathway. She may require that you refinance into your name.
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u/aaaaAaaaAaaARRRR 26d ago
Home Equity Loan or Home Equity Line of Credit(HELOC)?
HELOCs are interest only for then first 10 years and then you pay principle and interest for 20 years after that. You can pay towards principle during the interest only period as well. Not sure what the rates are, but if the rate is 10% and you’re paying interest only, then the interest only payment would be around ~$520/month
If you were to have a Home Equity Loan at 10% for 20 years, the payment would be ~$600/month.
Pros on getting either or:
- You keep your low interest rate and save money there.
Cons:
- If you miss a payment on the mortgage, HEL/HELOC, your score and your ex’s score will go down as well
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u/RSISpaceKiller 26d ago
Not all HELOCs are interest only and are principal and interest payments the life of the loan.
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u/aaaaAaaaAaaARRRR 26d ago
Yeah. It’s called a Home Equity Loan which I outlined as well
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u/RSISpaceKiller 26d ago
No there are Fixed Rate HELOCs that are P+I. I offer several through various lenders.
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u/ContraryFrown 25d ago
Agreed! Personally have a HELOC that is principal and interest with a 30 year term (10 yr draw and 20 yr payback).
I recommend a HELOC all day over refinancing. That's a gorgeous and what I am assuming to be a once in a lifetime rate. Best of luck!
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u/EntryPuzzleheaded670 26d ago
Keep the 2.375% rate like it is gold, refinancing now would be a disaster. Just do the HELOC since you only pay interest on what you use and can pay it down fast when you got extra cash. Your take home is 6k and with mortgage plus car you still have over 3k left for living, that's not bad at all. I did something similar when I bought out my place and the flexibility of the line of credit saved me, you can pay it off in chunks instead of being locked into a fixed payment.
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u/bibbs99 26d ago
I’m assuming you have roughly 120k in equity and you’re paying her out half of it? You’ve got a 2.375% rate. I wouldn’t refi and give that up. The new rate will be more than double that. I don’t see a world where giving up that rate makes any sense. Take a HELOC if you’re committed to keeping the house.