Target Net Cash-Out: $150,000
Compare the monthly P&I cost of consolidating vs. adding a 2nd lien.
1 Option 1: Existing 1st Mortgage + New 2nd Lien
Existing 1st Mortgage (4.020%)
Loan Payoff:
$318,335.00
Interest Rate:
4.020%
Monthly P&I Payment:
$1,692.48
New 2nd Lien (6.875% / 20 Yrs)
Loan Amount (Cash-Out):
$150,000.00
Interest Rate:
6.875%
Term:
20 Years (240 Payments)
Monthly P&I Payment:
$1,152.00
Total Monthly Debt Service:
$2,844.48
2 Option 2: Full Refinance (Single 1st Mortgage)
A new loan covering payoff, cash-out, and closing costs.
New 1st Mortgage (5.990% / 30 Yrs)
New Loan Amount:
$475,000.00
Interest Rate:
5.990%
Term:
30 Years (360 Payments)
Monthly P&I Payment:
$2,844.95
Total Monthly Debt Service:
$2,844.95
Summary & Comparison
Option 1 Total
$2,844.48
Option 2 Total
$2,844.95
Monthly Difference (S2 - S1)
+$0.47
Option 1 is cheaper per month.
Analysis:
- Option 1 (Two Liens) results in a total P&I payment that is only $0.47 lower than Option 2.
- Option 2 (Full Refinance) now provides the convenience of a single 30-year loan for nearly the same monthly payment.
- The client must weigh the slight difference in monthly cost against the simplicity and fixed 30-year term of Option 2.