Hi RAFA,
If you refinance the mortgage now, you can get a lower rate but you would also have to pay the closing costs. However, if you pay $300,000 cash towards the principal, it would help you in reducing the principal balance and will also help you in paying off the loan quickly. However, in case, if you are planning to stay in the property for 6-8 years, then it would be a good idea to refinance the loan at a lower rate.
Thanks
If you refinance the mortgage now, you can get a lower rate but you would also have to pay the closing costs. However, if you pay $300,000 cash towards the principal, it would help you in reducing the principal balance and will also help you in paying off the loan quickly. However, in case, if you are planning to stay in the property for 6-8 years, then it would be a good idea to refinance the loan at a lower rate.
Thanks
This might not be an "either or" question. It may be do both--refinance and lower the mortgage amount.
The answer may be dependent upon what sate and county the property is located in.
If you simply pay down the mortgage balance, the monthly payment will remain the same, but the term of the loan will be less. If you want to give the bank your money and keep paying the same amount every month, knowing you will not have as many months left to pay, you could do that.
There are some lenders who will "modify" your loan payment at the same rate, 6.25%, if you pay down the balance. There is a lender in NJ that would do that for $300, but, your loan has to be with them. You could check with your lender.
Your state and county are important because your present loan of $780,000 is a jumbo loan and the jumbo loan secondary market does not exist as it did a couple years ago, so, rates for a $780,000 mortgage are not as favorable as rates for $417,000 mortgage or less. Fannie Mae and Freedie Mac have taken up some of the jumbo mortgage slack by lending up to $729750 in designated high cost counties. There are 73 such counties in the United States and we do not know if you are located in one of them.
Those limits expire the end of this year and may or may not be extended.
Rates are at a new low point right now, so check your options quickly.
The answer may be dependent upon what sate and county the property is located in.
If you simply pay down the mortgage balance, the monthly payment will remain the same, but the term of the loan will be less. If you want to give the bank your money and keep paying the same amount every month, knowing you will not have as many months left to pay, you could do that.
There are some lenders who will "modify" your loan payment at the same rate, 6.25%, if you pay down the balance. There is a lender in NJ that would do that for $300, but, your loan has to be with them. You could check with your lender.
Your state and county are important because your present loan of $780,000 is a jumbo loan and the jumbo loan secondary market does not exist as it did a couple years ago, so, rates for a $780,000 mortgage are not as favorable as rates for $417,000 mortgage or less. Fannie Mae and Freedie Mac have taken up some of the jumbo mortgage slack by lending up to $729750 in designated high cost counties. There are 73 such counties in the United States and we do not know if you are located in one of them.
Those limits expire the end of this year and may or may not be extended.
Rates are at a new low point right now, so check your options quickly.
Let me throw something else into the mix here....
I agree that you should refinance the $780k to a lower rate if you can. However, I would NOT be so quick to use the $300k to pay down your mortgage. What else can you do with that cash? Real estate is at or near the bottom right now. I would use that money to buy a multi family building. If you find the right investment, your rental income not only would cover your expenses, but it could also pay for part or all of the mortgage on your primary residence. Then, you also get the increase in value over the years.
Put that money to work for you.
I agree that you should refinance the $780k to a lower rate if you can. However, I would NOT be so quick to use the $300k to pay down your mortgage. What else can you do with that cash? Real estate is at or near the bottom right now. I would use that money to buy a multi family building. If you find the right investment, your rental income not only would cover your expenses, but it could also pay for part or all of the mortgage on your primary residence. Then, you also get the increase in value over the years.
Put that money to work for you.
