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Home refinance/cash flow/future practice question

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  • Home refinance/cash flow/future practice question

    Hello all and thank you in advance.

     

    My quick synopsis. Married, 1st child due later this month, 29, 3 years out of dental school, Maxing out his and hers 401k/Backdoor Roth, Max HSA, 70k student loans 5 year variable 2.65% (Paying 2.5x minimum to be done Fall 2020)

    We used a "doctor loan" to purchase our home 2 years ago. Split into 2 loans: 1st) 90% total 30 yr at 4.125% and 2nd) 10% total 10 yr ARM 4.5%

    Since our purchase my personal finance thanks to WCI and the bogleheads has grown exponentially and I realize this may not have been the best approach.

     

    After diving into the refinance options I have been presented with 15 yr fixed 2.875 (2.96 APR) or 30 yr fixed 3.5 (3.55 APR). After recently paying off both car loans we do have the cash flow to roll into the 15 year loan. My issue is with a newborn on the way and goals of owning a practice within 5 years would you recommend decreasing cashflow at this juncture. ALternative options being taking the 30 year and make additional payments on it. Additionally schools are not ideal in neighborhood, may be looking to move in 4-5 years.

     

    Thank you all. If there are any additional tips with refinancing I would greatly appreciate any and all insight.

  • #2
    so cash flow is a problem and you are going to move.....

    take the 30 year. move on.

    Comment


    • #3
      I would take the 30 year and then I would probably start building up quite a bit of cash, especially if you think you're going to move in 4-5 years. I don't know what your current mortgage is but I feel comfortable that the one you're going to be looking at in 4-5 years likely won't be any cheaper than what you've got now.

      Comment


      • #4
        Is it even wise to refi to the 30 year? What are the refi costs? Difference in monthly payments? These questions are important given your likely move in 4-5 years.

        Comment


        • #5
          Thank you for the responses. Cash flow is not a problem, currently have an extra $700 freed up monthly from car payments. Paying an extra 3200 a month for student loans which will be done by the end of next year.

          Refi costs are 1100 for 30 year. 2600 for 15 year.

          30 year would lower monthly by about 300, 15 would increase by about 700. Thoughts were the money no longer needed for car goes to the house.

          Comment


          • #6




            Thank you for the responses. Cash flow is not a problem, currently have an extra $700 freed up monthly from car payments. Paying an extra 3200 a month for student loans which will be done by the end of next year.

            Refi costs are 1100 for 30 year. 2600 for 15 year.

            30 year would lower monthly by about 300, 15 would increase by about 700. Thoughts were the money no longer needed for car goes to the house.
            Click to expand...


            So it more than pays for itself in 4 months? No brainer.

            Comment


            • #7


              So it more than pays for itself in 4 months? No brainer.
              Click to expand...


              Feeling really dumb this morning - help me with your math.

              @osudds, I’m more interested in the practice purchase and your extra SL pmts. You’re paying $3,200/mo extra on SL’s at 2.65% and you’re going to take out a practice loan at a rate that could easily be double that. Agree you might want to hoard cash to borrow as little as possible but I think you’re overlooking the SL outflow. Might want to refi to 30 yrs and also stash the $3,200/mo toward the down payment.
              Financial planning, investment management and CPA services for medical professionals | 270-247-6087

              Comment


              • #8
                costs 1100 to refi the 30, saves 300/mo in payment for same duration so break even around 4 months. comparing the 15 year to current 30 would be a little more challenging

                also not sure how the ARM 10 yr factors in, is that included in the re-fi? but I'd want to get rid of that as well if so, so another plus IMO

                Comment


                • #9




                  costs 1100 to refi the 30, saves 300/mo in payment for same duration so break even around 4 months. comparing the 15 year to current 30 would be a little more challenging

                  also not sure how the ARM 10 yr factors in, is that included in the re-fi? but I’d want to get rid of that as well if so, so another plus IMO
                  Click to expand...


                  Ah - I thought @zaphod was referring to the 15-yr mortgage for some reason?. 4*7 = $2800, but in the other direction - that was all i looked at.
                  Financial planning, investment management and CPA services for medical professionals | 270-247-6087

                  Comment


                  • #10
                    Thank you again for all of your help. I wanted to clarify a few details that I realize came out a bit confusing.

                     

                    As it stands currently we are currently maxing all tax sheltered accounts, mortgage, etc and are cash flow positive. With the addition of a little one and the goal of practice ownership in the next 3-5 years there will be new variables at play. The student loans will be paid in full Fall of 2020 at my current pace. I realize that the additional payments could accrue more interest in brokerage account, but smart or not I want them gone. Both cars recently paid off in full, frees up $700 in monthly expenses.

                     

                    The refinance options I have listed would lump both of my current mortgages into 1. This would take the 10 yr ARM out of the picture.

                    Current mortgage has 28 years remaining @ 4.1625% (calculated by averaging the 2 loans) $2800/month (includes all taxes/insurance)

                    New Options:

                    30 year 3.5% fixed, 1100 closing costs, $2500/month

                    15 year 2.875% fixed, 2600 closing costs, $3500/month

                     

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