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Re-fi or Not

Old 11-02-2010, 05:24 AM
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A friend of mine is a mortgage broker. She called yesterday to encourage me to consider a re-fi our of current mortgage. We are 8 months into a 30 year fixed mortgage of 5.0% apr and currently have a balance of $290k on a home valued (today) at $580 to 610k. The re-fi would cost us $5.2k in all closing costs and provide a 4.125% apr 30 year fixed loan resulting in a monthly mortgage payment of $110/mo less than we are currently paying. It would take about 4 years to recover the $5.2k in closing costs. We plan on being in this house for at least an additional 4 years and likely 15+ years.

I’m right on the fence about the re-fi. It the closing costs were a bit less, like $3k then I would jump on the re-fi; if the costs were $8-9k then again, the decision would be easy. But $5.2k is a hard decision. Any financial advisors or mortgage consultants out there want to make comment.
Old 11-02-2010, 05:53 AM
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If you were to re-fi to get a 15 year loan - then I would say yes.
If you were to re-fi and go with 30 year then I would have to say no.

Check the amortization tables in four years on the 15 year and the 20 year.
A 15 year loan should be a lower interest rate as well.
Old 11-02-2010, 06:11 AM
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i was in pretty much the same situation, except i was in close to 4 yrs. wife decided to call mortage holder instead on the advise of our friend who was going to do the re-fi. apparently, the mortage company rather keep our business than to see us go somewhere else. didn't have to pay closing costs, just some kind of "paperwork" processing fee that was couple hundred bucks.
Old 11-02-2010, 06:16 AM
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Well talk to your broker friend and have then do their magic on that $5,200. There is at least two different ways that money can be reduced or even dropped.


So when you say you are locked into a 30 year fixed mortgage at X percentage does that mean for the next 30 years no matter what the economy does your mortgage will Always be at X percentage? Like in 1, 3, 5 years time you won't have to go in and re-write your mortgage?
Old 11-02-2010, 06:16 AM
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Seems a no brainer Chris, if you know you are going to be in the house long enough to recoup the 5.2K. Ordinarily you'd also be able to write off some of the closing costs but I don't know what that picture looks like since it appears you closed on the house once this year already.

Only down side; since your interest burdon will decrease so too will your tax write off - which might extend the amount of time it takes to recoup - but probably not by much, given that you're only dropping your monthly out of pocket by 110.

As mentioned above, you'll probably do even better with a 15 Yr note, but your monthly will go up. If you can absorb the monthly increase a 15 is TWTG.
Old 11-02-2010, 06:28 AM
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If you take the 30 year and make the 15 year payment you will usually be better off than just taking the 15 year and you always have the optin of making the 30 payment if things are tight.
Old 11-02-2010, 06:30 AM
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What is the 5,200.00 comprised of?

If it is recurring costs, such as tax and ins. escrows, you will receive a refund of your current escrow balance from your existing loan servicer.

Here in CT, based upon your loan amount, actual "costs" would be around 2K.

Costs are:

appraisal, appl. fee, credit report, atty fee, title search and title insurance. those are non-recurring costs.

taxes and insurance you will pay anyway.

look into it, that may not really be 5,200.00 in "costs".

as a general rule, if you are going to stay in a home for a year, then a 1% drop in the rate warrants a refi.

good luck.
Old 11-02-2010, 06:34 AM
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Even though you have closed on a house this year, thereby getting the "opportunity" to right off the closing costs on purchasing the house, you would still be able to amortize some of the closing costs on the re-fi, but not all. You can't just deduct the closing costs on a re-fi, they must be amortized over the remaining life of the re-fi. I can't believe that you can't get a better cost than your current banker quoted to you. When we "re-fied" at our bank, the cost was a 1/2% charge for a "change in rate or term" and didn't have to have an appraisal. This was available due to the relative life of the loan, ours was less than one year. Since yours is even shorter, take a look around and see if they will do that type of re-fi for you. Sounds to me like your banker is trying to make a little more money for the bank at your expense.
Old 11-02-2010, 06:36 AM
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that also may be the case.

there are 3 step refis at no cost depending on the current investor of your current loan.

then there is a harp loan, but the costs will be close to the 2K I mentioned
Old 11-02-2010, 06:38 AM
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I agree with hybrid. Call your current mortgage holder and see if they will refi for you. Usually they will do it for low or no cost. If they refuse, then you can always go back to your friend.
Old 11-02-2010, 06:53 AM
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I am a mortgage broker in NC. here is what you are looking at, now you have about 29 years left on your current mortgage at about 1556.78 p&i per month. your new loan will be a payment of about 1429.72 p&i per month. if you do the loan you need to pay your payment of 1556.78 on your new loan like you are making now. if you do this you will be paying extra money every month on your new loan. you will turn a 30 year mortgage into 25.49 years saves you about 4 years of payments, saving about 74,7425.44 total in intrst . for doing that same thing you are now. you can also look at a 20 year or 15 year note but you payment will go up. with the closing cost how you work that out is- you closing cost is 5200.00, you will skip a payment when you get your new loan. so you need to make that payment on your new loan this will get your closing cost down to ( 5200.00-1556.78=3643.22) 3643.22 you take that and / by you monthy savings $110.00 ( 3643.22/ 110.00=33.12) thats now many months you have to be there for the new loan to recoup you loss of equity, so if your planning on being in your home for 2.76 more years then you cant go wrong with doing it. if your planning on moving with in 3 years you are better off staying with what you have. on the closing cost you can ask the broker what their origination fee is , most of the time it is 1%. this is what the broker or bank makes,this number can be reduced. i do alot of loans now for 1/2% due to we are doing so many loans now and it keeps people from shopping around. all of my numbers are a little rough , but should be pretty close.
Any time you do a no closing cost loan the broker will pay the cost for you with the money he makes off the back of the loan (your intrst rate) if you do that when you will get a higher rate loan and pay more in the long run with the higher rate. i would only do this if your planning on moving anytime soon. that will help you recoup your closing cost faster if she pays most of the cost of the loan, but like i said you will not get the best rate there is out there. hopethis helps!!

Last edited by jburnham374; 11-02-2010 at 07:11 AM.
Old 11-02-2010, 06:55 AM
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Chrisrack,

I just refinanced my house as well. I called my current mortgage company and they sent me a at home packet which cost me $0.00. Dropped my rate from 5.75 to 4.50 percent and it didnt cost me a thing. I would try that before getting a broker to do it.
Old 11-02-2010, 10:33 AM
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Originally Posted by Mr. Demeanor View Post
If you take the 30 year and make the 15 year payment you will usually be better off than just taking the 15 year and you always have the optin of making the 30 payment if things are tight.
Not always. In many cases the 15 year rate is significantly lower than the 30 year rate.
Old 11-02-2010, 11:50 AM
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$5200 in closing costs? Like others have said above, what is included in that?

I'm surprised you did not get a rate under 5% 8 months ago. You can probably get a 4.25% or 4.375% rate with no points and no closing costs right now and that is what I would suggest.
Old 11-02-2010, 11:58 AM
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Originally Posted by gf View Post
$5200 in closing costs? Like others have said above, what is included in that?

I'm surprised you did not get a rate under 5% 8 months ago. You can probably get a 4.25% or 4.375% rate with no points and no closing costs right now and that is what I would suggest.
Agree with that, should not have to pay anything
Old 11-02-2010, 12:16 PM
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Just re-financed mine at 3.75 for 15 year. We were in year 8 of a 30 year at 5.5.
Our pmt is less on the 15 yr than the 30 due to saving almost 2 pts off rate.
If you can do a 15 year, it is worth looking into. We'll save almost 70K if loan goes term. We will keep house as a rental even if we buy another.
Old 11-02-2010, 12:53 PM
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4.125 % from a "friend" ? See above post and get a better friend!
Old 11-02-2010, 12:58 PM
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Sell the house and take the $300k equity and pay cash for a house. If your current mortgage payment is $2000 this will save you $720,000 and that's alot of cash.
Old 11-02-2010, 01:08 PM
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Originally Posted by gort View Post
Sell the house and take the $300k equity and pay cash for a house. If your current mortgage payment is $2000 this will save you $720,000 and that's alot of cash.
I like the way you think sir!!!
Old 11-02-2010, 02:46 PM
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Originally Posted by gort View Post
Sell the house and take the $300k equity and pay cash for a house. If your current mortgage payment is $2000 this will save you $720,000 and that's alot of cash.
I like that line of thought too but that equation can't even be considered. Already went down that road 8 months ago.

For those of you who think taht $5200 in closing costs is excessive .... you have never bought property in FL. The bulk of that is in State Stamps and State fees.

And for the knuckhead who thought that 4.125 was high on a fixed 30 year loan ....... Only on the Internet

I called PHH today (they hold the current mortgage at 5.0) and best they could do was 4.375 and 5400 in closing costs.

A 15 year loan is about 3.8 but monthly payments are higher than what I want to committ to right now but like always, we will continue to make extra payments each year.

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