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Refi Question

Twotimesacharm
Contributor

Refi Question

Currently, I am on a COVID forbearance plan that will end in June. Although I am not recieving lates on my CR, the balance is increasing because of the accumulating interest, and is hurting my score.

 

My home was lost to fire in November of 2017 and we are in the process of rebuilding. (Many set backs, but we are close). My current loan is sitting at about 338k and is very close to the original loan balance. It is equaled to about the value of the house before we lost it.

 

My question is this; when the build is finished, we anticipate the value to be between 500-600k, leaving a decent chunk of equity. I didn't really want to take any equity out when we were done with the rebuild, but I'm thinking it might be smart to refi and finagle something where I took out another 50k and just pay it back immediately and show a lower amount owed vs. original loan amount? Is that even a thing? Would it help my score? Thoughts?

2 REPLIES 2
SouthJamaica
Super Contributor

Re: Refi Question


@Twotimesacharm wrote:

Currently, I am on a COVID forbearance plan that will end in June. Although I am not recieving lates on my CR, the balance is increasing because of the accumulating interest, and is hurting my score.

 

My home was lost to fire in November of 2017 and we are in the process of rebuilding. (Many set backs, but we are close). My current loan is sitting at about 338k and is very close to the original loan balance. It is equaled to about the value of the house before we lost it.

 

My question is this; when the build is finished, we anticipate the value to be between 500-600k, leaving a decent chunk of equity. I didn't really want to take any equity out when we were done with the rebuild, but I'm thinking it might be smart to refi and finagle something where I took out another 50k and just pay it back immediately and show a lower amount owed vs. original loan amount? Is that even a thing? Would it help my score? Thoughts?


IMHO it would not be wise to borrow further against your home.

 

It's your home, you don't want to lose it.

 

If you can refi at a lower rate, and the interest savings will exceed your costs in doing so, by all means do it. But in my view it would be a mistake to try to get cash out of the transaction, because you're just digging your hole deeper if you do.  You're already in over your head.

 

If you do manage to keep the cash together and immediately pay the mortgage down by that amount, you will probably wind up paying a higher rate of interest.

 

As to whether it will help your scores.... I doubt it.


Total revolving limits 663000 (585000 reporting) FICO 8: EQ 716 TU 742 EX 713

Message 2 of 3
Twotimesacharm
Contributor

Re: Refi Question

Thank you for the reply and insight. I think we can do better on our interest for sure, its hovering about 3.5% right now, I believe we can get it down lower.

The payments are at a comfortable amount (when you don't have to pay rent for an apartment while your house is being built), but I would prefer to pay less if I'm able to (obviously).

I would think having so much equity would help lower the interest rate since the risk to the bank is being reduced?

We weren't planning on taking any money out for purchases, we prefer to keep the equity in our back pocket.

 

 

Message 3 of 3
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