Mortgage Blog

Refinance is only a small part of the financial planning

February 29th, 2020 1:16 PM by Eric Fang

Let's starting with a few stories. Hi, friends, since I did not mention your names, hopefully that would be ok.

Case 1, I closed on cash out refinance Nov of 2019. And we got the rate of 3.625% for 30 yr fixed. And it was a little bit high because of the cash-out loan, I indeed talked to the borrower about the reason. And he told me that we should have plenty opportunities in the stock market. And he needed more funds.
---> The rate is not that important, the opportunity is. I told him last week that he was smart
and he could refi a few months later with lower rates. And he could invest the money now.

Case 2, borrower did a purchase loan last year with 3.5% rate. We talked about options , whether he should go with 15 yr fixed 2.75%, etc. She told me she liked to have 15 yr fixed, but her son is still in college. Then I asked him to think about 10/1 ARM rate of 2.875%(APR 3.43%). But a bad rate for the 500k loan amount.

Case 3. Borrower has 3.25% 30 yr fixed, very good rate. Asked whether he need to do 15 yr fixed 2.75%. I told him that he did not have much of the benefits of tax deduction because of the new tax law. He should think about the big picture, like put more funds in the Roth IRA, 401k, 529 accounts. Or maybe think about the cash-out to use the funds wisely.

Case 4. I have lots of clients over 5-6 houses. Basically we grow together, they purchased lots of properties, and I got the good rates for them. And one client has 10 properties now.
And he cashed out two loans to get more funds, "for more opportunities". The rental refinance cash-out rate of 4% is cheap. For non cash-out 15/1 ARM rental rate lowest rate is 3.5%(APR 3.76). Strongly recommend it for rentals(loan amount around 400k, LTV <=60%).

In one word, refinance can only save us a little money. But if we can handle it wisely, then your life would be different.

Posted in:General
Posted by Eric Fang on February 29th, 2020 1:16 PM



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