[quote=Coronita]
If his current loan is .5% or higher than what he could get right now via refinancing, to me refinancing seems like a much better option because you can lower your monthly payment and also save on interest… After a refinance , he could still make the same monthly payment on his new loan so that more of it goes toward principle upfront, over time he could bring in the loan a few years….[/quote]
I think you’ve answered your own question with the “over time” words.
Refinancing wouldn’t get him NEAR as much cash up front during CV as not making payments would.
Let’s run a theoretical. Say he has a loan in the 450K range. Not unusual for the San Diego.
And if you think it would make sense to refi if he can save 0.5% interest rate. Let’s start him out at 4.5% and say he can get down to 4%.
A current 4.5% loan would be $2,281 mo for 30 years
A refi-ed 4% loan would be $2148 mo for 30 years
He’d save $133 a month. In three months time, he could save $6800 if he didn’t make the payments, or $400 if he refinanced. Not even close.
Let’s say he was able to skip a payment during the refi process (also pretty common)…that would make it $6800 to $2900.
Still not close. If you need money right now and in the short term, refi is not the way to get it. Not making mortgage payments is.
In the real long term, refi is the better solution obviously.
