Cash Out/ Refinance Analysis (loan, interest rate, escrow, property tax)

[vancep]

We purchased a 35 yr old home and have been in a 30yr fixed mortage for 13 yrs at 7.75% interest . Our original loan amount was $72,100 and we currently owe $60,745 & our current monthly note is $618.00. The home is really in need of interior repairs so e thought it would be a good idea to do a Cash out Refinance in order to acquire $20,000 to remodel..new floors, update bathrooms, kitchen etc etc.
We contacted a lender and they prefromed a Loan Analysis, I dont know if this is worth doing or not. I'm afraid I'm not as up to speed on this refinace thing as I should be and I dont want to jump off into something I'll regret afterwards
If someone is familiar with this type of Refinance could you please let me know if it sounds in line or should we reconsider our options.

Market Value of home is $130,00
Est Loan to value 64.37%
Term of new loan 240 months
Initial interest Rate 4.875
Annual Percentage Rate 5.227
Discount Points 2.125
Total points 1.125

Principle & Interest 554.88
Property Tax 71.50
Hazard insurance 43.89
Total Payment 676.67

Lenders Fees

Discount Fee 955.86
Application Fee 400.00
Other Lenders Fees 700.00
Total $2055.86


Escrow Settlement 400.00
Owners Title insurance 290.67
Title/settlement charges 250.00
Recording fees 115.00
Total Settlement charges 1055.67

Interest 1st/2nd 340.44
Hazard Insurance reserves 131.67
property tax reserves 643.50
Total Prepaid Reserves 1115.61

Lender fees 2055.86
Title/settlement charges 1055.67
Prepaids/reserves 1115.61

total Borrow Costs at closing 4227.13


Thanks in advance for any advice you can provide

[VictorBurek]

Your interest rate and closing costs will be based on your credit scores. Post back what your credit scores are and what state you reside.

Also, are you paying the points in addition to the $4227 in costs or are those points accounted for in that sum?

Regardless of whether you pull the equity out, you should refinance as your current interest rate is way to high. You might want to consider a 15 year term which would get the rate almost .50 lower.

Pulling equity out to improve your home is not a bad idea. The interest you pay on your mortgage is tax deductible and better than putting on a credit card at 19%. You might want to see if you can get any 0% financing for the improvements. i put pella windows in my house and they offered me 0% financing so i went with that vs pulling equity from home. If you cant or do not want to find this type of financing, pull the equity out and invest in your home as the improvement will help to increase the value.

[vancep]

Our Credit score was 698 and we reside in Louisiana. They said the points we are paying were accounted for in the total of $4227...I think he said the Discount Fee of $955.86 is what that represented.


Just out of curiousity, and if you dont mind me asking...How did you go about getting 0% for the window improvements? I didnt know if that qualified for some type of energy effeciency deal or what


Thanks a bunch for the response
Vancep

[VictorBurek]

vancep, that appears to be a fair deal that you are being offered.

I applied through Pella financing. And it did allow for a tax credit as i went from single pane to double pane windows, get with your CPA or tax advisor.

If you are buying many items from Lowe's you might want to ask them about financing plans, they might even offer 0%. In today's economy, companies are happy just to get a sale so they are offering many incentives.