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Is it worth refinancing?

Old 08-29-2011, 09:59 AM
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Default Is it worth refinancing?

Hello

Is worth the trouble of going through refi for a 450k morgage to go from 5.25 to 4.25 apr?

I have done my homework but want to hear some other opinions before I decide either way?

Thank you
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Old 08-29-2011, 10:06 AM
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Only you can decide if it is worth it to you but look at the amortization schedules for both rates and see how long it will take to recoup the cost to refinance. If it takes 10 years but you plan to sell in 5 then no, if it takes 2 years and you don't plan on selling then probably so.
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Old 08-29-2011, 10:10 AM
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With those rates, I'm assuming that you are looking at a 30 year mortgage. My gut feeling is that if your closing costs $4k or so, you will still save significantly with a 100 basis point drop. Also, depending on your cash flow, you might want to also crunch the numbers with a 15 or 20 year mortgage. These rates may be in the mid 3's, so this may give you an additional option.
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Old 08-29-2011, 10:23 AM
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That' great you even have the option to refi! There's a lot that owe more than the bank will lend, so no re-fi for you!
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Old 08-29-2011, 10:27 AM
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As stated, it all depends on how long you plan to stay in that home. Calculate your ROI and if you can pay yourself back the closing costs before you 'plan' to sell, then you should do it.

I have done the mental gymnastics and math on a refi and keep coming back to the fact that I will likely sell my home to someone else before selling it back to myself would pay off...
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Old 08-29-2011, 10:29 AM
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As stated, it all depends on how long you plan to stay in that home. Calculate your ROI and if you can pay yourself back for the closing costs with the savings before you 'plan' to sell, then you should do it.

I have done the mental gymnastics and math on a refi and keep coming back to the notion that I will likely sell my home to someone else before selling it back to myself would pay off...
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Old 08-29-2011, 01:55 PM
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A lot depends on your personal situation!
A big question is how many years are left on your current mortgage and what term are you looking at? Like mentioned before, drop to a 25, 20 or 15 year term. Also, check to see what the rate is if the lender covers all closing costs? As an example, I currently have almost 13 years left at 4.375. I'm refinancing to a 10 yr. term at 3.25 and the lender is covering all costs!
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Old 08-29-2011, 02:19 PM
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Originally Posted by sea nymph View Post
A lot depends on your personal situation!
A big question is how many years are left on your current mortgage and what term are you looking at? Like mentioned before, drop to a 25, 20 or 15 year term. Also, check to see what the rate is if the lender covers all closing costs? As an example, I currently have almost 13 years left at 4.375. I'm refinancing to a 10 yr. term at 3.25 and the lender is covering all costs!
If you wouldn't mind, who is your lender? My current lender wrote back 5.3% with 1.5% closing costs. Color me unimpressed. I want to keep shopping...
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Old 08-29-2011, 02:59 PM
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USAA is my lender. I have 26 years left on a 30. How long I will remain the house is a the question me and the ball and chain keep thinking about.
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Old 08-29-2011, 03:47 PM
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Cap here is what you have.

At:
$450,000
5.25% Payment is $2,484.92
4.25% Payment is $2,213.73

That is both being 30 year loans

Now if you are going to be there about 5 years and can get an interest only that might be your best bet. Hoping that the market will be stable on the house cost and you can sell at the same price it is worth now.

Interest Only:
5.25% Payment $1,968.75
4.25% Payment $1,593.75

Is that worth it to you? I was a manager for a morgage company for 5 years Yeah I would love to sell this mortage but it depends if you think the difference is worth the savings. The biggest question is how long are you going to be there?
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Old 08-29-2011, 04:49 PM
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Originally Posted by spankbomb View Post
If you wouldn't mind, who is your lender? My current lender wrote back 5.3% with 1.5% closing costs. Color me unimpressed. I want to keep shopping...
Yours is a JUMBO, if over the $417,000 FNMA/FHLMC limit. JUMBOs carry a higher rate, as very few banks want to loan their own money
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Old 08-29-2011, 05:02 PM
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Originally Posted by Reel Boobs View Post
Yours is a JUMBO, if over the $417,000 FNMA/FHLMC limit. JUMBOs carry a higher rate, as very few banks want to loan their own money

Roger that. They extend the 417k limit depending on where you live. In California they will do a VA loan for $1million now. Max in my county is $735. The VA loan is the best thing going as you need no PMI.
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Old 08-30-2011, 09:56 AM
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Originally Posted by spankbomb View Post
If you wouldn't mind, who is your lender? My current lender wrote back 5.3% with 1.5% closing costs. Color me unimpressed. I want to keep shopping...
I'm working with an independant here in PA. The mortgage is with NYCB. If you're in PA or NJ, they can work with you and I'd be happy to share their info.
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Old 08-30-2011, 09:58 AM
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Originally Posted by captbone View Post
USAA is my lender. I have 26 years left on a 30. How long I will remain the house is a the question me and the ball and chain keep thinking about.
I'd stay away from interest only and would look at doing a 25 or 20 year term! Would they cover any closing costs? If so, it would be a no brainer for me!
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Old 08-30-2011, 12:34 PM
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Doesn't take a lot of analysis when your looking at a 100 basis point spread and a 450k mortgage, unless your selling in a year. Also, if your looking at how long before you recoup your cost, you should be looking at payments based on actual rates and not APR's. The APR has the cost of recouping the financing costs built into it.
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Old 09-06-2011, 01:20 PM
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Any other tips or pitfalls? I'm looking to refinance, I'm only 18 months into my 30 year and interest rates are already a solid 1% lower than what I got. (rates actually dropped steeply the month after I closed)

I need to check my original paperwork to make sure there are no penalties for closing this loan early, I think I was locked in for a year.

ANY benefit to staying with a "big name" vs getting the cheapest rate I can find? Anything else I need to watch out for in terms of refinancing in general?

I'll likely be going for another 30 year fixed, in my situation doesn't make sense to shorten the term with rates that low since I may need the headroom for other loans in the future.

Last edited by Flot; 09-06-2011 at 02:40 PM.
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Old 09-06-2011, 02:25 PM
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The loan will get sold to dif banks eventually anyway (most likely).

Get the best rate and unless there are huge refi costs, it's a no brainer math-wise I am sure.

Just be careful the payments change the way you think they should (APR vs Interest Rate, etc.), term is the same, that it's a conventional/fixed rate loan and not variable, etc.
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