I am commenting because I don’t like some of the advice you are getting on this topic. I believe that right now you should be focused on wealth preservation and not high rate of return on your investments.
1. I would refi the loan and get a 30 year fixed. I say this because paying off the house quickly isn’t the best place to put your cash and if you run into any financial difficulty a 15 year loan doesn’t give you the option of paying less per month. If you choose to pay off your loan sooner there is no reason you can’t pay more per month. The 30 will give you the most flexibility and you won’t have to worry about your interest rate changing.
2. I would not recommend tying up all your cash in what now is clearly an illiquid asset. We don’t know what the future will bring but putting your savings and your available cash into a house that may take months or years to sell isn’t a smart choice.
3. Taking out a HELOC at this point makes no sense to me. You will expose yourself to more debt and will pay interest to borrow your own money. It seems to me you have plenty of equity in your home and are in no danger of losing it. Why open up that potential?
I believe there are 2 options ahead of us at this point. Since we all agree that the housing market is imploding and the economy is headed into a recession, we have 2 options.
1. Inflation. If the government decides to bailout all of these speculators and investors I believe that the rest of the world will shun US T-Bills. This means that borrowing costs will go through the roof.
2. Deflation. If all of the bail out plans and scheme don’t work we are going to see a serious reversion to mean. This will hit most if not all asset classes and until we get back to a normal lvl.
In either case a loan will either get more expensive in the form of higher interest rates or very hard to get as banks tighten lending even more. Lock in your interest rate for a long period of time if the payment is manageable and keep your cash on the side ready to take advantage or either scenario. Do not take on any more debt if you can help it.
For what it is worth I believe we are going into a fairly short term inflation event then a much longer deflation period. There is no asset class left that can create free wealth like the housing market did so we have to get back to a reasonable level. All that the bailouts will do is delay this from occurring but it will happen.
