Weird refi question

[cardude]

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?

 

[al_bundy]

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

 

[ziggy29]

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.

 

[REWahoo]

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.

 

[cardude]

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.

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

Good point.........

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.

 

[growing_older]

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.

 

[cardude]

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.