Real Interest Rates at a New Low

[Tybee]

That makes a lot of sense. I guess only potential downside I can see is if we hit another real estate bubble.

Why would you rent out current home instead of selling? Do you want to come back, and keep your current house? Renting your house from across the country can be very stressful.

[jp1]

We are nervously considering doing a refinance cash-out on our house so that we can have cash on hand when we look for a new place in the next 1-2 years. The best option we've got is 2.625% with zero points and $1602 in closing costs on a 30-yr fixed mortgage in the amount of $510k. It feels like everything is in place and the smart thing to do. Great rate, everything easy to accomplish (dh's steady long-term employment, high value collateral, etc.) but dh and I are both nervous. We've just never done anything like this before. We've always been in the pay it off early camp. The idea of all that cash, with the corresponding interest, is unnerving.

Any words of wisdom?

What is your current interest rate. It's undoubtedly higher, so that will be a plus. Also, though, how is this going to affect the monthly payment? Yes, you can park the money somewhere to cover the interest, but you should also account for the additional monthly cost if there is any.

[Tybee]

Our house is paid off. Refi cash-out is the term even though there is no existing mortgage. In the past we've had rates of 11.5, 7.75, and the last one was 5.75 on a 15-yr. loan. I can't believe how crazy low they are now.

Short-term it will be weird to make payments while the money sits, but we were putting that money into savings anyway, so it's just a matter of re-routing the funds.

It's tempting to consider the 15-yr. loans at 2.37%, but the monthly payments would jump uncomfortably high.

So you will have two houses to care for and maintain and repair. That's one issue. Will you lose your homestead exemption on the taxes if you convert it to a rental? Are you allowed to rent it out under terms of new mortgage?

[Teacher Terry]

If living in Atlanta is temporary I would rent there instead of buying.

[pinkytoe]

I have been dealing with a mortgage loan officer this week and for our situation - paid for house but trying to buy in another state she suggested a regular mortgage on the second house which is then "recast" into regular 30yr which can be paid off ASAP without penalty. We don't intend to keep present house though. One house is enough trouble.

[razz]

Hypothetically, if you take $500,000 in cash equity now through financing at 2.5% and get 1% or less interest on that revenue, all I can see if that you are losing money, a lot of money. Can you obtain any savings rate on the total that will not tie it up and still yield more than the interest on the mortgage?
How long would you be in Atlanta? Compare the pros and opportunity costs as well of renting a place there and simply retaining you current home. Why do I think that you wanted to move away from your current home in a couple of years? You have too many variables to play with, it seems to me.

[San Onofre Guy]

Our house is paid off. Refi cash-out is the term even though there is no existing mortgage. In the past we've had rates of 11.5, 7.75, and the last one was 5.75 on a 15-yr. loan. I can't believe how crazy low they are now.

Short-term it will be weird to make payments while the money sits, but we were putting that money into savings anyway, so it's just a matter of re-routing the funds.

It's tempting to consider the 15-yr. loans at 2.37%, but the monthly payments would jump uncomfortably high.

you are debt free now, remain so. Don’t take on the risk of a foreclosure. Once out of debt, stay out of debt

[Tammy]

I agree. Renting for a few years in the new location is a better plan.

[jp1]

I agree with others. If the concern is that you want to keep your current house while testing out living in Atlanta then I would rent for a year in Atlanta. Renting out your current home would provide income to pay the rent in Atlanta. After a year you could then either sell your house and buy something in Atlanta or move back if it turns out that you didn’t like Atlanta. A side benefit would be that you could figure out what neighborhood of Atlanta you wanted to live in while you are renting.

[Teacher Terry]

Renting is usually a big problem with 3 dogs. I forgot about them)