Does It Still Make Sense to Refinance in Today’s Market?
Published on - December 29th, 2009 (by J.D. Roth) Last winter, Kris and I refinanced our mortgage. Interest rates had dropped, and it seemed like a good idea to make the leap. Though it took us a couple of months to actually pull the trigger, we finally ended up cutting the interest rate on our loan from 6.25% to 4.96%. According to sites like ShopRate and HSH.com, mortgage rates are still low, with loans available in the low- to mid- four percent range.
While doing research for Chapter 10 of Your Money: The Missing Manual (“House and Home”) over the past couple of weeks, I’ve looked up a lot of info about refinancing mortgages. Ultimately, I had to cut most of this material (replacing it with a single paragraph).
Rather than let what I learned go to waste, I thought I’d share the basics here at GRS. Much of this came from Tim Manni of HSH.com. (Manni is the author of HSH’s daily blog which concentrates on the latest developments in the mortgage and housing markets.)
Manni says that the obvious reason people refinance is to save money. They want to lower their interest rates. That said, people do refinance for other reasons, including:
- Changing mortgage types (from an adjustable rate to fixed rate, for example)
- Consolidating debt (which isn’t always the best move)
- Tapping home equity (while avoiding a second mortgage)
Manni says that the old rule-of-thumb was to refinance when mortgage rates had dropped 2% below your current loan. “But waiting around for mortgage rates to drop two percent can wind up costing you time and money in the long run,” says Manni. “For some homeowners, refinancing to a new interest rate as little as half a percentage point less than your current rate could be enough for substantial savings.”
How can you tell if refinancing makes sense for your situation? Easy. Crunch the numbers. HSH.com and U.S. News & World Report have a refinance calculator, for example, that lets you calculate your change in payment, and shows you how long it will take to recover any costs associated with refinancing your mortgage. (There are dozens of other refinance calculators out there that will provide the same basic info.)
Manni says that it’s important to understand the costs involved in refinancing your mortgage. “The more it costs you to get your new loan, the longer it will take to recoup those costs. It’s important to have your refinance work to your advantage.”
Closing costs for a refinance are about the same as for a normal mortgage, or can even be higher if you don’t have much home equity. If your goal is refinance to a lower interest rate, HSH.com’s Vice President Keith Gumbinger says, “It’s generally best to refinance when the savings from your lowered mortgage rate will allow you to recoup the price of closing costs in 24 months or less.”
When Kris and I refinanced in March, for example, we calculated that making the scheduled payments, we’d repay the closing costs in less than a year. (But because we paid more than the scheduled amount, the closing costs have long since been recovered.)
As with all mortgages, be sure to read the paperwork if you refinance. I know it seems insane to read 100+ pages of legalese, but if you don’t read what you’re signing, you have nobody to blame but yourself if something goes wrong.
I’m curious: How many homeowners out there have refinanced this past year? Have you considered it? Why did you choose (or not choose) to refinance your mortgage? Do you think you might refinance soon? And how many people are worried about a possible rise in interest rates?
For a more in-depth look at refinancing, check out the HSH.com article “Refinance: Is It Right for You?” You also can see different lenders’ lowest mortgage rates or request mortgage quotes from reputable lenders at this site.
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We refinanced last January. The main reason that we did it was to lower our monthly payment. My husband works for Wachovia (now Wells Fargo) and there were serious questions at the time about if he would still have a job in 3 months. We already had a 15 year mortgage that we had been paying on for a number of years. We refinanced to another 15 year mortgage at a lower rate and took $350 off our payment. Our plan was (and still is) to continue to pay the mortgage at the old amount so that we would not end up paying for it any longer than if we had not refinanced (we have less than 8 years left at this rate). However, should something happen to DH’s job then we have some flexibility in our budget (the mortgage is our only debt).
We end up saving a couple of thousand dollars in the long run with the refinancing but I am not sure that would have been enough on it’s own to get us to refinance at the time. The big thing for us was the breathing room if we needed it. I work part time but I could cover the new mortgage on my salary alone if need be. Couldn’t do that on the old mortgage.
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We refinanced back in January. We had a first mortgage @ 6.375 and a small ($13K) mortgage @ 7.174. We refinanced both into a 15 year @ 4.875%. If I remember correctly, our payback was about 13 months, so we are almost there. Our payment actually went up a bit, because we went from a 30-year situation to a 15-year, but obviously we are paying it back far more quickly now. We had actually planned to make extra payments, but with the economy the way it has been, decided to just save the money instead. We are still making great progress with the principal amount, and we have a good cushion in the bank for anything that might happen. I never thought we would have a mortgage at less than 5%!
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..”be sure to read the paperwork if you refinance. I know it seems insane to read 100+ pages of legalese”.. It does seem insane! Especially due to the nature of such contracts, and how they are formalized. It can be a pain in the a.. to go through such an amount. But I highly agree. In these days when people have realized that financial institutions are businesses operating to make profit, just as any other company out there, it seems reasonable to pay close attention to, whatever you sign.
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We refinanced in March of this year. We went from 6% to 4.7% and we went from a 30 year term to a 25 year term (we were 4 years into the 30 year term, so we trimmed an extra year) and we also had to pay down or mortgage by a few thousand to get to 70% LTV so we reduced our principal amount too.
Like Sheila, we had planned to put the savings back into the mortgage and pay it down more quickly, but that didn’t happen. We plan, in 2010, to pay an extra $100 a month in prepayment for a total of $1200 for the year.
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We’ve been in our house for a little over a year. We bought a big old 110-year-old Victorian house that is in good shape, but needed a couple of big-ticket items–windows, siding, insulation. When we bought the place, our loan had to be a jumbo, which meant the rate was high–7.5% for a 30 year fixed. A year later, the threshold for jumbo loans was a lot higher, and President Obama’s mortgage assistance legislation became available to us, so we were able to knock the rate down to 5.125%. It winds up saving us nearly 25% on our payment (which includes PMI and escrowed taxes). We’ll use the extra money to pay for our windows, siding, and other improvements, which we’re tackling one at a time. The upshot, though, is that our house is more affordable, we’re making improvements that increase our equity and that give us tax credits for energy efficiency, and all in all, it’s been pretty good.
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We refinanced a few weeks back in December. We went from a 15 year at 5.625% to a 30-year at 4.375%. The main reason we refinanced was to give us “breathing room” in case either my wife or I lost our job due to this economy. The payment was reduced by over $800 per month, but obviously, extending the loan out for an additional 15 years. We plan to continue paying the 15-year mortgage payment on the new 30-year mortgage, and having run the numbers, the interest savings over the life of the loan is greater than $20k and we would still pay it off in the same time frame (15 years). But, at least in the case of job loss or some other emergency we could always pay the actual 30-year mortgage payment, which would keep over $800 in our pockets each month. We did the payback period to calculate closing costs, and at a little less than 3-years, it made sense for our situation.
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We’ve had a 5.375% 30 year mtg for several years now and haven’t felt that the rates have dropped enough to warrant a refi.
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We refinanced in October. It was only one year since we purchased the house with a 30 year, 5.875% mortgage, with 5% down. I hate paying PMI, so we’ve paid aggressively, and had to replace the furnace (expected) and roof (not expected). When we refinanced, the value of our home increased 6%. Just our PMI was reduced $50 per month. That means more money going towards the principle. That savings in itself will pay for the refinance within 2 years. We should have the PMI removed within a year and half. I was kicking myself for locking in the rate a week to early though.
However, I think most of the tradition advice about refinancing is bogus. Generally, they say if you payment goes down by $100, it’s a good idea. But with that logic, someone who has paid on a 30 year mortgage for 20 years, should take out another 30 year mortgage. I looked at the amount we would save in interest and PMI. I was looking to increase the amount we pay towards principle. Our payments dropped by over $100, so can now pay more per month towards principle without changing our payment, plus, there is some breathing room if something goes wrong.
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I didn’t refi but did buy in the last year lured in by low interest rates and the 8k tax credit.
With many people now owing more on their homes than the house is worth, refinancing makes sense for many who will be staying in their homes for some time.
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We just refinanced from a 30-year fixed at 6.5 to a 15-year fixed at 4.4%. Closing costs were $800. We had 22 years left on the original loan. I got it figured out that if we pay $200/month extra on the new loan, it will be paid off in 11 years – half the time as the original loan. Sweet.
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We refinanced our mortgage in May. Went from 5.31% 7 yr rate with 3 yrs remaining to 5 yrs at 3.75%. We will end up saving about $4,700 over the remaining 3 yr term – that is $6,600 in interest saving minus $1,900 penalty for breaking the previous mortgage. We left our payments as they were and reduced the amortization period to 6.5 yrs
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Most people only think about their monthly payment, which is a great way to stay in debt forever.
There are two big problems with refinancing, that most people ignore.
1. It costs thousands of dollars, even if the costs are rolled into the new loan (which they usually are). Most people don’t care, but this is a major problem because it amounts to a large amount of money compared to the interest that they actually pay off.
2. People usually get a new 30 year loan. This means, that they never pay off their mortgage. In order to improve our situation, we need to pay it off sooner than we would have had we not refinanced. So, this usually means switching from a 30 year to a 15 year mortgage.
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We were 2 years into our 30 year mortgage, paid it down an extra $30k, and then switched to a 4.875% 15 year (from 6.125%). It is an extra $140 a month. The 15 year is under $100k in interest, the original mortgage was $350k in interest.
For $140 * 180 payments = $25k + $30k in prepaid interest = $55k, we saved over $200k (we had already paid over $30k in interest those first two years, so I can’t use the original $350k of interest).
We’ve since paid it down some more, so we have 11 years and $50k of interest left. I think we’re going to start diverting some of that to savings now though.
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My wife and I refinanced to a lower interest rate and shorter term on our primary residence two times now. We started with a 6.875% 30yr loan, then to a 5.95% 20yr loan (0 closing costs), then finally to a 4.99% 15 yr loan (again, 0 closing costs) in 2005. Although our payments increased slightly, this was offset by my increased income.
I considered refinancing the remainder of my primary residence, along with the remainder of an investment property (6.375% x 25 more years + PMI), into a 10 or 15 year mortgage on my primary residence this year, but the closing costs, combined with the risk of increasing the principle on our primary residence made it less appealing.
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I have not refinanced. We have a 20 year mortgage at 5.75 with over 13 years left. We are settled, with no plans to move–I have a job with tenure, my wife is self-employed locally. The mortgage would be for about 40% of the value of the house. We don’t want to increase our payments, kids are heading toward college, but we manage what we have now fine. I have looked at refinancing and can’t decide. I would love some input.
I can get a 15 for 4.25. The plan would be to roll the closing costs into the mortgage, don’t want to give up the cash. The new mortgage would be lower payment a bit over $100/month. If I continued to pay the same amount as before I would net out about $6k in interest over the 12 years it would take to pay off the mortgage under this scenario.
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We have a 30 yr mortgage at 6.25 and a piggyback loan at 7.5. I thought we would be good candidates to refinance, but I called our primary lender, and they said that they piggyback loan made it very difficult to refinance. I would like more information from those of you who refinanced with a 2nd mortgage and how you accomplished that. They basically told us that it would take forever to get permission from the second lender, and that it was likely that they would deny the refinance. I would love to get a lower rate, but we are unsure of our future in the house (i.e. we might want to move in as little as three years), and I would hate to go through all the hassle only to break even.
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We looked into a refinance a few months ago (we are 5 years into a 30 year term at 5.625%), mostly to lower our interest rate, but decided against it because we likely wouldn’t recoup the costs of the refi before we plan to move in ~2 years. We decided the money we would have spent on a refinance would serve us better going into our designated account for our next down payment (we’re likely to get little to no equity from our current place to roll over into our next house).
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We decided not to refinance after I crunched the numbers. Our current mortgage is a 30-year note at 5.875%, but we pay extra principal every month so that it is functionally a 15-year note. We’ve had the loan for four years. We considered refinancing to a 4.5% 15-year note. I really expected the refinance to be the way to go, but it turned out we’re better off sticking with our current mortgage. The new mortgage would lower our monthly payment, but when you add on the four years of extra principal and interest payments plus the closing costs, it cost slightly more to refinance. I even took into account the interest we would earn by socking away the difference between our current payment and the new payment in a high-yield checking account or short-term bond fund. It’s not the result I was expecting, but I’m confident we’ve made the right choice. Crunching the numbers yourself really makes a difference.
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We refinanced this year because we were in an interest-only loan and we wanted to switch to a traditional loan and we wanted to lower our interest rate. We’ll repay our closing costs in about a year, and now we’re paying a nice amount of principal every month.
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We refinanced last February. We recouped the cost of the refi by August, and are “saving” approx. $500 a month ( we got a lower rate and are no longer a “jumbo”). We have, however, continued making the same payments as before to our mortgage, and the extra $500 a month goes to the principal. We haven’t missed the money, as we were used to spending it and now are simply paying down the mortgage faster. We also have the benefit of breathing room if there is a job loss, sickness or lifestyle change. I recommend refi’ing if the numbers “crunch” properly.
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We didn’t refinance this past year, but that’s only because we’d gotten a screaming deal the year before that on our refinance. (4.625% 15yr with no closing costs and no appraisal.) My rule of thumb is to refi if I can get 1% better with low or no costs.
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JD – would love to see some information around loan modifications as an alternative to a refinance. It seems like the cheaper, less involved way to go!
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We closed on our home in June of 2007 at 6.25% with 5% down. Hated to think about closing costs, etc. in just two years but realized that we’d save quite a bit by refinancing and at the lower rates. We refinanced in May at 4.75%. Our PMI has gone down 64% and we continue to make extra payments towards the principal. We are now looking at HELOC to use as an extra emergency fund. Luckily the location we moved to and house we bought has appreciated each year.
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We wanted to refinance, but disappointingly with all the costs associated with refinancing, we would save no money.
We have 20 years left on a 30 year loan, so have essentially been paying mostly interest. We could have refinanced from 6 to 5%, got all the paperwork prepared for it. Suprisingly, even with “0″ closing costs, our monthly payment remained unchanged (maybe 5 dollars less a month). Because our mortgage balance is low (right now balance 60K) even the loan agent we spoke to said there was really no benefit to refinancing versus paying more on the balance. If you are going to refinance, seems best to do that towards the beginning of the mortgage, otherwise the benefits are diminishing.
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After owning our home for 2+ years, we refinanced last spring. We went from a 6.5% rate to a 5.5% rate (30 years), BUT the refinance didn’t cost us anything. (Oddly the 15 year offered was also 5.5%… we’ve been trying to wrap our heads around that one.)
Wells Fargo has a loyalty program where they add a point to the going rate but don’t charge any fees, and they do all the work for you, all you have to do is sign a huge book full of forms (which does take a while when you read what you’re signing). Yes, we could have gotten a much lower rate doing a regular refinance, but that would have cost us time and effort and we’d probably still be sitting at 6.5% interest if we’d done that because we’re lazy. Having just come off reading the Paradox of Choice we decided to satisfice rather than be paralyzed doing nothing.
They even paid for a home appraisal which we then took to the local property office to get our property taxes lowered.
We did make sure to pay the extra payment for the month that didn’t get paid while the mortgage was going through– otherwise our loan would have been bigger by a month’s payment… turning interest owed into principle, which is not cool.
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I know this isn’t on topic but…
Woohoo! Your book is available for pre-order on Amazon. Congrats!
…and I can’t help but notice the apparently strong affinity between your book and office supplies.
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But what about the closing costs? I have a 5.875% 30-yr (24 years left). I can get a 15-yr now @ 4.5% but the closing costs are insane. Over $6k for a $150k mortgage. I don’t even know how to calculate the payback on that when my monthly cost goes up but the loan ends 9 years earlier.
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Just started the refi yesterday. Locked in at 4.75, down from 6.25%. Plan to keep paying the same payment on our new 15 year loan, which should have us paid off in less than 10. WooHoo! Closing costs around $3000. I figure we’ll save $18K, so why leave $15K on the table – no brainer.
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I have not yet, however BoA keeps sending me letters offering to get me out of my 30 year (26 remaining) to a 15 year + 2 points. The new rate is 1.8% lower then I’m currently paying but incurs closing costs that would essentially take 33 months to break even at, while paying the minimum each month.
I’m still torn.
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On reading through your entire contract…
I work with a fellow who bought a condo (years ago) in Canada and when he went to sell it this year, ended up having to pay a hefty fine for early settlement on his loan.
Of course, he never read the whole contract and was furious. He even went so far as to contact the better business bureau and, get this, the embasy (who kindly told him to call someone else)!
It was almost embarrassing listening to him talk about how everyone was out to get him and the lengths he was willing to go to punish others for his own mistake.
Penalties for early settlement of a mortgage are pretty typical, aren’t they?
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We tried to refinance twice, but were not approved. The first time was with the bank that holds our mortgage and HELOC. Even though our monthly bill would drop by $100-200 a month (and the term would be cut down to 15 years), and they were all gung-ho at first, they suddenly changed their tune and started generating all sorts of obstacles. The one they nailed us on was that they dropped the valuation of our house well below market value, then claimed we couldn’t qualify for PMI on the $5000 our loan would be beyond 80% of the value. They volunteered to give us the refi for just our mortgage, but without folding the HELOC into it, we couldn’t afford the higher payment. We really got the feeling they were TRYING to sink the refi, and later we read an article about how banks don’t like to refi their own HELOCs bc they make so much more on interest. OK, so our mistake in going to the same bank–a mistake that lost us the $350 in fees we’d paid to lock in the low refi rate.
A month or two later, we approached a small local bank that was willing to let us know first if we’d qualify before we’d have to pay any lock fees. Wouldn’t you know, we didn’t qualify this time because “Too many inquiries into credit status” was on our report. At least this time we didn’t lose money to find out that we wouldn’t get the loan.
We are hoping to be able to refi this year, as our current mortgage is in the mid-6% range. Hopefully, the amount we’ve knocked down the balances in the past year is enough to qualify without needing PMI.
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Also, are there lenders that are “good” or “bad”? When I do an internet search for the best rates on a typical day, the lowest rates are through banks I’ve never heard of. Is there a way to check out the banks? Or are they all fine? What if one chooses a bank that then goes under?
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I would say that if I were a betting man, I think interest rates will stay the same or go even lower in the months to come.
Might make sense for a lot of us out there to take a look at refinancing
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We refinanced early last year–spurred in part by your posts about the process, JD. We consolidated an interest-only 5/1 ARM and an interest-only 2nd into a straightforward 30-year with no PMI.
In retrospect, I realize the 5/1 ARM was a decision based on my prior experience with a mortgage–where I initially bought with a standard 30-year but refinanced once to drop PMI and then again to do some remodeling. All that in the space of 6 years. So the ARM seemed to only be logical, since we anticipated the need for similar work/remodeling on the current house.
However, I was nervous about the financial situation, and in particular, about things that might happen with my husband’s self-employed business. As it turned out, it was good that we refi’d when we did, since we were able to do it on the basis of my 12-year employment history and salary. And about three months later, I was unexpectedly laid off.
Like lots of other folks have mentioned, the breathing room of a set payment (and a slightly lower payment) was at first a nice comfort-level thing–and has since become a lifesaver.
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@32 Suzanne
I can only speak from our experience. We got our original mortgage from a small local company, who promptly sold it to Wells Fargo. Working with Wells Fargo has been really easy ever since we switched. They bill us each month, there’s a nice form on the bill to specify exactly where any extra payment goes (escrow vs. principle vs. future payments vs. penalty payments).
The refinance was pretty easy after some initial bumps… everybody and their brother tried to refinance the first time we did and they still had kinks in their system (their appraisals for TX were based on national numbers and too low and they had no way to let us pay down the principle to get to the 80% number… so we were denied for something well under 1K), so after a few months the refinance restarted with profuse apologies from them and all the previous problems fixed (more accurate appraisal numbers, a way to pay extra to make the loan go through which we didn’t need to do with the new appraisal). The second time went like clockwork and left us feeling really good about Wells Fargo for mortgages.
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I think too many people just look at the monthly payment going down and base their decision totally on that. Sure, it’s great to increase your monthly cash flow, but you’ve got to think about things like:
1) continually extending your payoff by refinancing. Replacing a 30 year loan you’ve had for 5 years with another 30 year just keeps you in debt longer.
2) rolling closing costs into the mortgage. It’s nice to not bring cash to the table on a refi, but do you really want to pay interest on that money for 15/30 years? There’s a reason these have become popular for mortgage brokers to push.
3) calculating your “payoff period”. I think the average ownership period for a home is around 6 years. I wonder if people really consider if they’ll be ahead on the loan before they decide to move.
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We were thinking of refinancing but decided that the costs of the refi would negate the savings.
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My parents just refinanced their house. They got a 15-year loan at 4%. I’m not sure what they were paying before, but it seems like a pretty low interest rate all the same. They were coming from a 30-year loan that they got in 1996, so it actually makes the total time to pay off the house slightly shorter. It seems to have been a good decision for them.
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I got a 5/1 ARM @ 4.5% initial rate 6 years ago. When they sent me my first adjustment last year, my rate stayed at 4.5% thanks to low interest rates. My payment actually went up 1 cent. The 1-year LIBOR is now 1/2 of what it was last year (just above 52-wk lows), so I’m currently planning to let my mortage adjust again for at least another year. But I’m keeping an eye on it.
I don’t suggest this strategy for everyone, but I can afford to play the game, since I have the strategic reserves to refi (potentially to another ARM) when it becomes advantageous to do so (or disadvantageous not to).
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MrP and I considered refinancing our 30 year fixed rate mortgage last winter/spring. It wasn’t worth it to refi for another 30 years. Refinancing to a 15-year mortgage was borderline. We decided instead to keep our existing mortgage and pay on a 15-year schedule, which left us financial flexibility in the event of an emergency.
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What experience have people had with appraisals coming in too low? I’ve had a few friends that forked out the $600 for an appraisal only to find that it grossly undershot what they wanted to refinance.
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We looked into refinancing a few months ago but our banker told us we weren’t able to b/c part of our loan was through FHA. I don’t think this was mentioned anywhere else so I thought I’d better throw it out there for people to be aware of.
It’s somewhat disappointing to know it’s not even an option but probably for the best since we’re only 2+ years into a 30 yr fixed at 6.2%. Plus, like someone else mentioned, we have a ‘piggy back’ loan that would make it really hard (financially) to justify doing.
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There’s a math mistake in your article: “(But because we paid more than the scheduled amount, the closing costs have long since been recovered.)”
This doesn’t sound like an apples to apples comparison to me. You probably didn’t come out way ahead because you made extra or over-payments. You recover your closing costs via the difference in interest and the difference in your payment. That is, your payments are lower, so you pocket the difference and your interest is lower so a bit more of each payment goes to principal.
If the calculation is that you’re repaid in a year (because of the pocketed amount and the reduction in principal), putting extra on the loan doesn’t make much difference (just the amount of interest on the extra that you won’t have to pay now). It just transfers money from your pocket to your principal. You’re still repaid in about a year.
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We primarily refinanced too get out of an ARM into a fixed rate at a much lower rate (8% to 5.5%). After doing some research we also did it through a FHA 203(k) in order to do some renovations. Looking back in hindsite, the initial refinance was easy but the extra paperwork for the 203(k) renovations was a real bear. Contractors baulked at the idea of giving our bank their financial info. Getting the contractors and projects approved by the bank took very long. The bank we refinanced with sold our mortgage right in the middle of renovations which held up payments to contractors. Getting the final renovation disperment checks also took almost 2 months after the renovations were finished and inspected. Most of the issues were with the banks and not the 203(k) program itself. But just like JD always says “Nobody cares more about your money than you do!”. Find a bank to help you through the 203(k) program and make sure they are there for you and not going to sell it the first chance they get before renovations are done and contractors are paid.
Looking back, we would probably do it again but would get the renovation and bank schedules closer together so we don’t have projects waiting on checks coming from bank offices across the country. Our new bank is Bank of America, which is another whole can of worms….But, for 3 months of trouble, we went from a 30 year ARM to a 30 year fixed rate, at a much lower rate; got $30,000 of renovations done (new kitchen, appliances & energy efficient windows); and are paying $200 less a month. All and all it was worth it but many lessons were learned along the way.
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@DonB (#43)
Oops. You’re right. You’re right. I was thinking crazy.
I’m just relieved this mistake doesn’t actually affect anything major in the post.
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I looked at refinancing a while ago through the same mortgage broker I used for the loan. She sent me an estimate showing that I would only be saving 50$ a month. I checked the numbers and she had rolled my 2nd mortgage in, but then was comparing the amount to my payment for only the 1st mortgage. This was after she told me that I could not roll the 2nd mortgage in. Check the numbers yourself always!!!
I still haven’t refinanced, its tricky with the 2 mortgages (not eligible for the really good interest rates), and the assessed value is way below loan amount so I would only be eligible for certain programs (Freddie/Fannie backs my loan through Wells Fargo).
@18 ClaireTN Maybe run the numbers keeping your monthly payment the same. You’re comparing one scenerio where you are overpaying the mortgage to another scenerio where you aren’t. I would think that would show that the new loan is paid off faster than 11 years but maybe not if the closing costs are high relative to the amount left on your mortgage.
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Just talked to a friend who did a refi for the mid 4% – the only problem is she is 62 and it is a 30 year loan. And we thought the days of house ATMs was over?
No mortgage here. We have no intension of paying the bank during our retirement years!
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We refinanced our mortgage in October– went from a 20 year fixed @ 6.0% to a 15 year fixed @ 4.5%. Since the cost of refinancing was relatively low and we plan to be in our condo for at least 5 more years, we figured it was worth it.
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I currently would LOVE to refinance, have a 6.25% loan. But like many I no longer have 20% equity in my house due to the real estate downturn. I’ve been living here for over six years and have made every payment on my 30 year loan.
Quite frustrating when I look at the rates out there.
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@#30:
They’re very common in Canada, since our mortgage system work s little bit different. Here, you sign up for a mortgage term of anywhere between 6 months to 10 years, with a 25, 30, 35 or 40 year amortization.
You aren’t locked into one interest rate for the entire life of your mortgage, but you can get nailed (as he did) if you try to sell before the term is up and the mortgage in non-transferable.
I’m a diplomat and those kinds of calls are freakishly common. So common, in fact, that the British government did a series of ads on what you can and can’t expect yourembassy staff to help you with. My favourite was the case where someone called for advice on how to prevent her daughter from getting a boob job.
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