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Heck yes, I'm refinancing

11 Responses to “Heck yes, I'm refinancing”

1. Mr. Meager Says:
   January 24th, 2008 at 12:06 pm
   good deal

2. disneysteve Says:
   January 24th, 2008 at 01:12 pm
   You should wait. The Fed rate cuts don't directly influence mortgage rates which are usually tied to the 10-year Treasury bills. It can take a month or two for the Fed cuts to show up in lower interest rates.
   
   I'm watching and waiting too. We are at 5.875% now and it looks like we may be able to get under 5% the way things are going.

3. lost in debt Says:
   January 24th, 2008 at 05:10 pm
   As a mortgage lender for a National Company who has 22 of experience watching the markets, the key week will be the second week of February. However, rule of thumb is it is generally not worth it to refinance unless there is a 2 point spread. You need to take the payments on your current mortgage and multiply them by the number of months remaining and then take the new loan with the number of payments and months remaining, then add your closing costs from the new loan and see how much you are saving, then decide if it is worth it. Many times just making one extra payment a year will cut thousands off your mortgage and make it not worth refinancing if the spread is not high enough. I discourage refinancing unless it is really worth it and I discourage putting unsecured debt against your primary residence.

4. disneysteve Says:
   January 24th, 2008 at 06:51 pm
   lost in debt - Thank you for your post. I've never really heard it explained that way before. But I'm not sure I follow your logic. If I make an extra payment each year, I'm spending more money to shorten my term. If I refinance, I lower my payments, spending less each year to shorten my term. Seems to me that would win out over 15 years. It would take a couple of years to break even due to refi costs, but after that, I'd be ahead. Or am I missing some piece of the puzzle?

5. mulyanto Says:
   January 25th, 2008 at 11:03 am
   lost in debt - I'm going to move fairly soon (4 years or so), so for me it's more about what amount of my payments go to interest, and what amount goes to principal right now. If I shorten to 20 yrs my interest payments drop by $130, and my principal payments go up by $180. Refinancing costs about $1300 here, so I will earn it back in 10 months or so.
   
   disneysteve - thanks for the info. However I concede if I go with a commercial lender I save about .25 to .5 percent compared to my credit union. But I want to hit the sweet spot for rates at my credit union. If you say the low will hit between 4.5 and 5 percent, my credit union's low will be between 4.75 and 5.5 percent, most likely. My current interest rate is 6.75%

6. lost in debt Says:
   January 25th, 2008 at 03:51 pm
   Many people refinance every five years or so, if you do that you do not get the true benefit of a refinance. What I see is they refi to pay off early, then they get the idea of doing home repairs and refinance again, thereby losing the benefit. It usually takes three to four years to recover the cost of refinancing before you actually start seeing the savings. At 6.75% if you shorten the term some it will make it worth it to refinance. However, if you are selling soon, you don't really reap the benefits. Let's say you paid $2,500 for closing and you are saving $50 a month, it will take you over four years before you start seeing the savings.

7. lost in debt Says:
   January 25th, 2008 at 03:52 pm
   Many people refinance every five years or so, if you do that you do not get the true benefit of a refinance. What I see is they refi to pay off early, then they get the idea of doing home repairs and refinance again, thereby losing the benefit. It usually takes three to four years to recover the cost of refinancing before you actually start seeing the savings. At 6.75% if you shorten the term some it will make it worth it to refinance. However, if you are selling soon, you don't really reap the benefits. Let's say you paid $2,500 for closing and you are saving $50 a month, it will take you over four years before you start seeing the savings because you have to deduct the closing cost first.

8. disneysteve Says:
   January 25th, 2008 at 04:38 pm
   "Many people refinance every five years or so, if you do that you do not get the true benefit of a refinance."
   
   I agree with you there. That isn't what I had in mind. Last time we refinanced, we were 3 years into our 30-year and went to a 25-year, eliminating 2 years. Now we are 5 years into the 25-year and are looking to refi to a 15-year, eliminating another 5 years. It would take us less than 2 years to recover the cost of refinancing, not 3-4 years.

9. lost in debt Says:
   January 26th, 2008 at 11:53 am
   That's great, getting closer to being debt free. Not many people I see are doing that, they are just refinancing to put in credit cards and clean up their debt(you know what I think about that), add on to the house or reduce higher rates.
   
   New Fannie Mae guidelines require that we price a loan based on loan size (loans under $75,000 have a higher rate), we price basedon your credit score (loans with a score of 620 or less have a 1 point adjustment to pricing) and the Loan to Value (if you are borrowing more than 70% of your value and you are taking cash out there is another adjustment to the pricing). So you can see the rates advertised but not everyone is going to get the same thing.

10. disneysteve Says:
    January 26th, 2008 at 04:30 pm
    Fortunately, we are not the typical American family when it comes to money. We would be refinancing strictly to cut our rate, cut our payment and shorten our term. We aren't pulling cash out or trying to pay off any other debt (we have no other debt). Our loan would be about 100K. My credit score is in the 800 range and the loan amount would be about 1/3 the value of the home, so there is no reason we shouldn't qualify for the best rates.

11. lost in debt Says:
    January 27th, 2008 at 03:21 am
    You are absolutely right, in my business we call you "golden" - keep up the good work. According to David Ramsey, 70% of the population lives paycheck to paycheck, that is why they are frequently refinancing; trying to get relief. Your case is much different.

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