I am planning to take out a $1.7m IO loan at 6.5% and am wondering about the best strategy to pay this down if I am hoping to refinance soon. Below is my current plan/thinking, but I would appreciate any discussion about this and if I am missing anything. I’m new to this.
Current thinking:
1. I own 20% equity in the property and am hoping to refinance in the next 1-3 years if rates drop to around 5.0-5.5% (who knows if this will happen)
2. Over the rest of the year, I will focus on rebuilding my emergency fund to then park in a HYSA, since this was depleted by the home purchase. I should have this ready by December.
3. In January, I will get an additional ~$90k cash I could potentially use to pay down principal and my understanding is this auto-recasts the future IO payments (does this make sense vs. splitting some into the market)
4. Given the size of the loan and the interest rate, I should be able to itemize and benefit from mortgage interest deduction and max SALT (hopefully the cap gets lifted in 2025). Any other benefits from ownership?
Is this the right approach? Should I be considering the P+I loan instead (~125bps lower interest rate, although the monthly flexibility of the IO payments is material)? Are there any risks I may not be considering?
Current thinking:
1. I own 20% equity in the property and am hoping to refinance in the next 1-3 years if rates drop to around 5.0-5.5% (who knows if this will happen)
2. Over the rest of the year, I will focus on rebuilding my emergency fund to then park in a HYSA, since this was depleted by the home purchase. I should have this ready by December.
3. In January, I will get an additional ~$90k cash I could potentially use to pay down principal and my understanding is this auto-recasts the future IO payments (does this make sense vs. splitting some into the market)
4. Given the size of the loan and the interest rate, I should be able to itemize and benefit from mortgage interest deduction and max SALT (hopefully the cap gets lifted in 2025). Any other benefits from ownership?
Is this the right approach? Should I be considering the P+I loan instead (~125bps lower interest rate, although the monthly flexibility of the IO payments is material)? Are there any risks I may not be considering?
Statistics: Posted by Goldie50 — Sun Jun 16, 2024 9:09 pm — Replies 0 — Views 52