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Weird refi question
Old 02-27-2009, 02:15 PM   #1
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Weird refi question

We are going to sell our house (or try to anyway) and downsize and I can't decide if I should refinance the house now from a 6.5% rate to a longer term and a 4.75% rate. I will have to spend $8k in closing costs plus commit $75K of my cash to get under the jumbo threshold of $417,001. By doing the refi it would lower our SWR from 2.9% to about 2.4% because the payment would drop considerably.

Normally, I think the answer would be NO don't do it since we don't plan to be in the house long enough to recoup the $8K in closing costs, but I am soon to be unemployeed and I don't think I can get the refi done when I have no earned income (I may be wrong about this).

So, do I leave the loan alone and take the risk that the house will get sold in a reasonable amount of time and live with the higher SWR but conserve cash, or do I play it safe and get the lower payment and lower SWR of 2.4% by doing the refi, and use $83K in cash in the process? Is going from a 2.9% SWR to 2.4% worth using up basically a year's worth of living expenses in other words?

What am I missing here?
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Old 02-27-2009, 02:41 PM   #2
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if you're going to lose your job, i'd say hoard the cash
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Old 02-27-2009, 02:45 PM   #3
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I would agree. Personally I'd apply that to almost anyone -- preserve your cash if you have any question about job security in this economy. Debt reduction is a wonderful thing, but right now nothing is more wonderful than lots of liquidity.
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Old 02-27-2009, 02:46 PM   #4
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Quote:
Originally Posted by cardude View Post
Is going from a 2.9% SWR to 2.4% worth using up basically a year's worth of living expenses in other words?
I don't think it would be to me were I in your shoes. Right now I'd much rather have the cash.
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Old 02-28-2009, 07:27 PM   #5
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Quote:
I would agree. Personally I'd apply that to almost anyone -- preserve your cash if you have any question about job security in this economy. Debt reduction is a wonderful thing, but right now nothing is more wonderful than lots of liquidity.
Ziggy: Yeah, I guess I could use the money to buy some more Berkshire Monday. I bought some Friday before last for $2250, so $2000 per share is certainly not out of the question.

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if you're going to lose your job, i'd say hoard the cash
Good point.........

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Right now I'd much rather have the cash. 02-27-2009 08:45 PM
And another vote for keeping the cash. That's what I was leaning towards, but I sure like bouncing ideas off others. Thanks.
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Old 02-28-2009, 10:01 PM   #6
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I'd lean towards holding the cash. With liquidity you have options and ability ride out a much longer jobless spell. No telling how long a job search might take in the next year. I'd opt for safety (cash) in the current economic climate.
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Old 03-02-2009, 08:55 AM   #7
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I'd lean towards holding the cash. With liquidity you have options and ability ride out a much longer jobless spell. No telling how long a job search might take in the next year. I'd opt for safety (cash) in the current economic climate.
I actually was not going to search too hard for a job, if at all. I think we have enough money to quit on if we can downsize the house. Actually, even with the bigger house we are at a 2.9% SWR right now, although the portfolio keeps dropping so that's gonna keep rising I'm afraid.

I still want/need to downsize, but I think I have some time to do it. This is probably a terrible time to try to sell the house, but our realtor has a doctor moving in from Chicago so maybe he will bite.
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