Should we cash-out Refinance? (loan, fixed rate, interest, 401k)

[anrn]

We're thinking about cash-out refinancing. Ages 55 & 59; have 1 yr. cash for expenses on hand, and debt-free other than mortgage. Only owe $30K @ 6.375% on house valued @ $180K. Can get refi @ 4.25,% so we'll improve our rate (save) on the balance we owe on, anyway. We both have stable, recession-proof jobs, so no concern there. We plan on carefully investing the difference, either in CD's or some of it in stocks. Either way, I think we'll beat the market. Anything we're NOT thinking of???

[chet everett]

Originally Posted by anrn

We're thinking about cash-out refinancing. Ages 55 & 59; have 1 yr. cash for expenses on hand, and debt-free other than mortgage. Only owe $30K @ 6.375% on house valued @ $180K. Can get refi @ 4.25,% so we'll improve our rate (save) on the balance we owe on, anyway. We both have stable, recession-proof jobs, so no concern there. We plan on carefully investing the difference, either in CD's or some of it in stocks. Either way, I think we'll beat the market. Anything we're NOT thinking of???

Why not just DO a 'HELOC' and pay off the first???

$30K is too small for refi. If you do not NEED the money it is pretty darned stupid to put it in CDs which are NEVER going to pay very much interest and are fully taxable.

Stable recession proof jobs are great, additional debt is not.

Why would you want to extend out your term as you approach retirement age?

You seem to be "not thinking of" quite a lot of things...

[anrn]

What is a "HELOC?"

[chet everett]

Home equity line of credit.

Generally a variable rate, but right now still low.

You could also get a "fixed rate / fixed term" home equity loan for $30K and use that to pay off the 1st mortgage, but rates have risen on such products to the point where they may be a higher rate than a refi...

[formercalifornian]

If you increase your principal payments, you will effectively lower your interest rate without the penalty of loan processing fees.

As far as the investments, what's the reason for cashing out? If you're confident in your investment strategy, why not take money out of your savings instead?

[anrn]

I did not define things well originally. Our intention is to refinance the entire $180K, and cash the difference of $150K to invest, and hopefully make up for money lost recently, such as in 401K's. Will only consider a 15 yr. mortgage.

I'm not looking to create new debt that would be risky; just beat the current market and perhaps recover some lost money. That's why I said CD's and possibly some low-risk stocks.

[MeInDenudinFL]

Currently, if you get into the market you could make some good returns. But are you willing to take that kind of risk at your age? If yes, go for it. Putting it in a CD is just a BAD idea, borrowing at 4.25% and getting a taxable profit. I haven't seen a CD that pays even this much. Please think through all your alternatives.

[chet everett]

Originally Posted by anrn

I did not define things well originally. Our intention is to refinance the entire $180K, and cash the difference of $150K to invest, and hopefully make up for money lost recently, such as in 401K's. Will only consider a 15 yr. mortgage.

I'm not looking to create new debt that would be risky; just beat the current market and perhaps recover some lost money. That's why I said CD's and possibly some low-risk stocks.

DO NOT ATTEMPT THIS!!!!!!

You have no idea how risky this is. Even the lowest risk stocks could leave you in a TERRIBLE position for periods and you would be in terrible shape.

Look at the price history of a company that is a pretty safe well run firm:AMGN - Amgen, Inc. - Google Finance

I have no idea how changes over the next YEAR might beat up this stock, no way would it make sense to through cash at that for 15 years!!!


Over the next 5 years even CDs are unlikely to return enough to offset a your borrowing costs!!!

[formercalifornian]

Over the next 5 years even CDs are unlikely to return enough to offset a your borrowing costs!!!

I agree. For the OP...Please talk to an independent certified financial planner (CFP) before you proceed. I worry that you're looking for advice on a public forum where you have no idea whether or not the information you receive is credible.

[sheenie2000]

Originally Posted by formercalifornian

I agree. For the OP...Please talk to an independent certified financial planner (CFP) before you proceed. I worry that you're looking for advice on a public forum where you have no idea whether or not the information you receive is credible.

I find that the advice on here is better than some ahole financial planner who is just looking to take your money. Here, while sometimes people put misinformation, most aren't being deceptive or trying to take your money.