Refinance mortgage to replace HVACs

[emanon1501]

I was already thinking of refinancing the mortgage to take advantage of low rates. My plan was to refinance it for exact amount. But, one of my HVAC is having several issues and it makes sense to replace it. I pretty much decided to replace both as both are 28 years old

Paying cash is out unfortunately. It will be between 15k to 25k. This is in Austin TX and they ask a lot for it. I know if I look hard, I can replace both for around 10k.

Many places offer zero interest, but they jack up the price. It much cheaper to get cash rate. I am not sure how much. Is it better to get zero interest or lump it into mortgage?

Any other ideas or feedback is appreciated.

Thanks.

[Jluke]

If you can’t get the same price for cash versus zero percent financing then I would try for cash.

Do you have an emergency fund?

taxable investments?

maybe you can pull all or some from those accounts and make up the difference with the cash out refinance.

how much equity do you have in your home? Want to be sure you won’t have to pay PMI if you end up lower than 20%.

do you currently deduct your mortgage interest for taxes?

Perhaps a home equity loan or line of credit might be another alternative but I’m not sure.

[disneysteve]

How long of a mortgage would you be taking out? Do you really want to be paying off the HVAC over 15 or 20 or even 30 years?

How long would it take you to pay it off on its own, outside of the mortgage? I'd second considering a separate loan like a HEL/HELOC so that it's not drawn out for the life of the mortgage. Run the numbers and see which way makes the most sense. The interest rate on our HELOC (which has a zero balance) is currently 2.99%. The mortgage probably won't be that much lower.

[~bs]

Yes do it if absolutely necessary. I do understand hvac is essential in different areas of the country.

[rennigade]

I have no idea how replacing an hvac would cost $15k to $25k? All of the duct work is in place. They're just replacing the air handler (the unit inside) and the condenser (the unit outside.) There will be some misc stuff like electrical wire, maybe new copper lines, etc etc...but that shouldnt cost anywhere near $15k. Im assuming you're not living in a 25,000 square foot mansion?

[scfr]

I have no idea how replacing an hvac would cost $15k to $25k? All of the duct work is in place. They're just replacing the air handler (the unit inside) and the condenser (the unit outside.) There will be some misc stuff like electrical wire, maybe new copper lines, etc etc...but that shouldnt cost anywhere near $15k. Im assuming you're not living in a 25,000 square foot mansion?

OP has 2 HVACs s/he is looking to replace. Not uncommon to have 2 in a house in Texas. When I lived there I only had 1, but I had a "small" (by TX standards) house. Probably going to go with a high SEER (worthwhile to pay more upfront to save in electricity costs because, again, it's Texas). And said that if they think that if they look/shop around more they could get the 2 for $10K.

To OP: Having lived in TX for 12 years, I've gotta say that I'm pretty impressed that your current ones have lasted 28 years.
Maybe wait until the winter to see if you can get a better price?

[ua_guy]

My only other thing to suggest is, if you've got a good offer on a credit card (at like 0% for 18 mos) and can pay off the HVAC without incurring interest over the promotional period, that's not a bad way to go. Just don't let the balance accumulate interest.

Refinancing with cash out for the AC isn't an awful way to go and really isn't so different from buying a home with AC; technically you're still paying for the HVAC unit over the life of the loan too. But I'd only do it if you've got the equity, refinancing ultimately saves you a wad of cash, and it doesn't put you in a position of paying PMI. I'm not a fan of second mortgages or equity lines - if things get really bad, those are usually eligible for recourse if you default on them, whereas with a primary, many states do not allow recourse.

[rennigade]

OP has 2 HVACs s/he is looking to replace.

Ok...that explains a little more at least. We have hvac's upstairs and downstairs too. I somehow missed that in their post.

[bjl584]

I'd think a new furnace or AC unit would be around $3000 all in for either unit.
You already have all of the duct work and electrical in place.
It would be an easy swap

But,
I second looking for other means to pay for.
Either a separate loan, a HELOC, or limp along until you can cash flow it

[emanon1501]

Thanks everyone. I decided not to lump it with the mortgage. The idea of paying it for 15 years is crazy. I will use equity loan and snowball it.

[myrdale]

There are 2 HVACs.

One works. One doesn't.

There is a "need" to replace one.

There is a want to replace the second.

HVAC is a luxury, not a necessity.

There is not enough cash on hand to replace either, so a loan is necessary.

Honestly, if it were me, I'd shop around and only replace the damaged unit for now. Also I like the idea of waiting until fall to shop around for deals at that point.

Additionally I'd get a personal loan rather than rolling it into the mortgage. If your house were paid off in full, would you borrow against it? If not, then what's the difference? With the exception of the roof, I'd be hard pressed to take out a loan for anything that could put my home on the line.

Keep in mind, you could do a window unit for a fraction of the cost to hold you over. $500 spent today if it saves you $2,000 by being able to wait 4 more months is a hell of a return on investment.