Background: We purchased our home a few years ago with a 2.9% interest rate, benefiting from a large down payment after selling our previous house. We don’t have escrow or PMI, so we handle insurance and taxes separately each year.
We currently have about $100K in equity, thanks to regular extra payments on the principal, the initial down payment, rising home prices, and a $50K price drop from the seller.
Our mortgage company has offered a refinance at a 5.45% interest rate, allowing us to cash out up to $100K. This would increase our monthly payment by around $400-$500, depending on the amount we choose to cash out.
We have two vehicles with monthly payments of approximately $500 each, with balances of $25K and $15K, respectively. Additionally, we have about $10K-$15K in credit card debt, which is unusual for us but resulted from a few unexpected expenses. Under our current budget, we could pay off this credit card debt within six months.
Aside from utilities, we don’t have any other bills. There are some non-essential home improvements we’d like to make.
On paper, refinancing seems to make sense: we could eliminate the credit card debt, pay off the vehicles, and set aside money in a HYSA for the home improvements or apply it back to the principal.
But am I missing something? Is there a downside I’m not considering, or does this seem too good to be true?