Should I do a cash out refinance mortgage?

Should I do a cash out refinance mortgage?
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#1

About 2 years ago I bought my first home and decided to go with a 10 years fixed 3.125%, $205K loan. Now with the reason of wanting to pay way less monthly and to not have all my assets tied up to the house, I want to do a cash out refinance. Lucky for me, that rate is still low and the housing market has been up recently.

I just asked a bank today and they gave me a quote of 30 years fixed 3.875%, $2,400 closing cost - $800 credit, + $52K cash out (with my estimate of the home’s value).

The reason I want to do this is to have more of my money putting in mutual funds, as this will more diversified my portfolio as I’m feeling I’m very house poor. I put most of my money in the house.

Is there any pros and cons with this? Should I pull the trigger and do it before rates go up again?


#2

You don’t indicate how old you are, which is one consideration that would impact the advice on this matter.
Otherwise, it sounds as if you feel you bit off a bit more than you could chew with the 10 year mortgage and big downpayment. But before you give up, consider the fact that you are 20% of the way to owning free and clear! In only 8 years you will be completely mortgage free - and then you will have plenty of extra cash to invest and spend - for the rest of your life.
I think I would rather see you keep the mortgage you have, and possibly open a Home Equity Line of Credit - to be used only for emergencies. If you do tap the line, pay it back as quickly as possible.
Borrowing money for the purpose of investing is not a good idea, in my opinion. Others may differ, but I consider that you have already leveraged yourself to buy the home (and there is risk to that) - to then double down and take on more leverage to buy a much less stable investment in the stock market is not wise to me.
I would rather see you renew your commitment to the rapid mortgage payoff, try to earn some more money where you can to feel a little less house poor, and put all your energy into getting mortgage free as quickly as possible.
I would try to find an unbiased financial coach or hourly fee financial planner who can help you consider this question in light of your overall budget and financial situation before making a final call.


#3

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