So I have encountered a dilema. When we bought our home 2.5 years ago, rates were pretty good, but now they are phenomenal! Roughly speaking 2% difference. I would love to refinance, but because we got a 100% financing loan and home values fell a bit, our homes value is probably not greater than our current loan. Rates are so different that I could switch us to a 15 year mortgage and pay only a few hundred more a month, saving literally $100k+ over the life of the loan. On top of the difference between our current loan and the homes value, would be the various loan fees, which I am assuming I can pay with cash on hand.
Option one is to pay extra to the home, from money currently being allocated to student loans. We've been making a massive effort to get rid of student loan debt the past 12 months. While all the student loan debt is at lower rates than our mortgage, it represents a very significant portion of our income each month and I would like them gone in case of emergencies. The current plan has us paying them off in two years with the extra payments we are making. Switching those payments to the house would make refinancing possible in about 6-8 months, but would delay paying off the student loans. Purely speaking numbers, this option makes the most sense; however, I am not keen on delaying the student loans.
Option two, would be to get a TSP loan and use that money to pay the home down below 97% LTV and refinance. Probably we would get a 30 year loan, but pay it as a 15 year, providing some buffer for emergencies and the like. I think I would make the TSP loan a two year loan. This would allow us to refinance 'now' and continue paying the student loans down, though obviously at a slightly reduced rate. The current interest rate for TSP loans is somewhere around 1.3%, which is taxed, but goes back into your funds with the loan. Obviously there would be some opportunity cost since my money couldn't be making C, S, I fund interest.
Anyone have any thoughts on this matter? I didn't want to get too specific with numbers here and I understand that makes things harder to comment on.
I'm entirely open to other suggestions too!