Thank you all very much for those responses. This has been really helpful, and I truly appreciate all of your time.
@Carl , I think I have a better handle on this. We're married filing jointly, and our itemized deductions won't be >$25K. If I have this correctly, we won't benefit from having mortgage interest of any kind, as we're not going to get above that threshold so there won't be any actual impact on our net taxes paid.
We're planning on refinancing the home. The question we were asking was whether it was beneficial to refi and just lower our interest rate/monthly payment (from ~5% to <3%) and get onto a shorter loan, or pull home equity out for projects but pay $20K extra over the life of the loan (15 year refi) or $100K extra (20 year refi). I had hoped that there was some sort of tax benefit to taking on that extra money that we would be paying in interest payments, but it sounds like it wouldn't.
You made some great points about the necessity of a refi. Over the life of the loan, we're looking at substantial cost savings if we just refi and don't pull any equity. If we pull equity on a 15 year refi, it's basically a wash on our current mortgage vs what we'd get on a refi. If we pull equity on a 20 year refi, we'd end up spending quite a bit more over the life of the loan. But we'd have money in hand now for projects and our monthly payment would still go down. But all that said, it sounds like the true cost of borrowing this money is still substantial. Please tell me if I'm missing something obvious. Thanks a ton for all of your insight.
