When evaluating whether it is worth it to do a cash-out refinance to access equity in your property, you need to consider a few key factors:
- Cost of capital: The interest rate you will pay on the new mortgage is a key factor in determining whether it makes sense to refinance. In your case, moving from a 3.8% interest rate to a 7.6% interest rate would significantly increase your borrowing costs, which will impact your monthly cash flow.
- Opportunity cost: You also need to consider the opportunity cost of the funds you will be accessing through the cash-out refinance. If you have other investments or opportunities that would generate a higher return than the interest you will be paying on the new mortgage, it may make more sense to invest your money elsewhere.
- Cash flow: The increase in your mortgage payment as a result of the higher interest rate and additional principal borrowed through the cash-out refinance will reduce your monthly cash flow. You need to determine if you have enough cash flow to comfortably cover the increased monthly expenses and if the potential long-term benefits of accessing the equity outweigh the short-term cash flow reduction.
- Long-term goals: You should also consider your long-term goals for the property and your overall investment portfolio. If your goal is to hold the property long-term and generate rental income, the cash-out refinance may be a viable option, even with the increased monthly payment. However, if you plan to sell the property in the near future, the additional borrowing costs may not be worth it.
Ultimately, whether the money now is worth more than the hit to your cash flow depends on your individual financial situation and investment goals.
