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I offered the following solution to help my brother refinance his existing fixed term mortgage at a lower rate. Can you tell me if this will work?
Background:
* His 5-year fixed is locked in @ 5.3% with 2 years remaining.
* Balance of $90k.
* Lender allows him to make extra payments of $40k each year with no penalties.
Proposed solution to refinance:
1) I lend him $80k just before the anniversary date (late November.)
2) He pays down $40k just before the anniversary date, and another $40k just after.
3) Leaves the remaining $10k at the old rate, and refinance $80k at the current rate (2.9% on 2-year fixed.)
4) Pay me back the $80k.
Thanks for your comments/suggestions.
Background:
* His 5-year fixed is locked in @ 5.3% with 2 years remaining.
* Balance of $90k.
* Lender allows him to make extra payments of $40k each year with no penalties.
Proposed solution to refinance:
1) I lend him $80k just before the anniversary date (late November.)
2) He pays down $40k just before the anniversary date, and another $40k just after.
3) Leaves the remaining $10k at the old rate, and refinance $80k at the current rate (2.9% on 2-year fixed.)
4) Pay me back the $80k.
Thanks for your comments/suggestions.