Have you refinanced lately?

[fivepoint]

I'm in the process of refinancing my house at a 3.875% rate on a 15 year conventional fixed-rate loan... should be finalized before Thanksgiving. The resulting monthly payment is actually going to be LOWER than my current 30 year loan at a 6.625% rate - in addition to lowering my total interest paid (over the course of the loan from around 250,000 to just about 50,000! The final reason we ended up going with the 15 year over the 30 year (4.375) was that I really liked the idea of paying almost 3 times as much to principal each month vs the 30. Based on the history of mortgage rates, I think this is an amazing time to refinance and am just curious if anyone else here is going through this process, how its going for you, and what kind of deals you're getting.

Now, if only the value of my house would start to rise again!
I fear it might be headed in the other direction some more before this is all said and done.

 

[rhett7660]

I just finished up my refinance last month. I didn't do the 15 year thou I did a 30 year. No complaints here!

 

[Queso]

My mortgage is already low at 2.95%, although it's variable so could go up in August if the ECB raises the 12-month Euribor between now and then. It'll be paid off in about 4 years or so.

Otherwise I have no debt.

 

[Doc750]

My father just went through this. They closed last week. It was a hassle for him b/c he was self employed so they wanted a **** load of paper work.

The only tip I can give you is go through the paper work with two companies at the same time, who give you the best rate. We went literally down to the last minute with the paper work with one company sitting in front of us ready to sign, and the guy from the other company calling every 3 min with a lower offer just to get out business.

In the end he ended up going with quikenloans, with 1/4 point lower then the initial offer they had made, with no points.

 

[fivepoint]

Otherwise I have no debt.

That's AWESOME, Queso. Not many people can say that. All I've got now is the Mortgage, College Loans, and one small car loan (I don't plan on having loans for vehicles in the future)

My mortgage is already low at 2.95%, although it's variable so could go up in August if the ECB raises the 12-month Euribor between now and then. It'll be paid off in about 4 years or so.

Based on the historical lows we're experiencing right now, it would seem like it might be a good time for you to lock-in a low fixed rate loan don't you think? A lot of economists I read think that we could be headed back to another 1980's style inflationary period which would mean your variable rate could skyrocket. Just curious if you've considered. I'm far from a mortgage expert.

 

[Queso]

Based on the historical lows we're experiencing right now, it would seem like it might be a good time for you to lock-in a low fixed rate loan don't you think? A lot of economists I read think that we could be headed back to another 1980's style inflationary period which would mean your variable rate could skyrocket. Just curious if you've considered. I'm far from a mortgage expert.

It's a lot of hassle considering the timescales left on the loan. There's also the charges associated with cancelling the old loan and starting a new one to balance against any interest savings, so all in all I'm happy to leave it be. If it were a bigger outstanding amount though I'd definitely consider it.

 

[ejb190]

If it were a bigger outstanding amount though I'd definitely consider it.

That's the smart way of looking at it.

I have a Home Equitity Line of Credit (HELOC) instead of a mortgage. We transfered the mortgage into a HELOC a few years ago when we took out a loan to add on to the house. My interest rate is a bit higher then it might otherwise be (it was an excellent rate then), but there were no closing costs associated with this loan. It's a 15 year, but we should have it payed off in 9 years or so.

e.

 

[fivepoint]

It's a lot of hassle considering the timescales left on the loan. There's also the charges associated with cancelling the old loan and starting a new one to balance against any interest savings, so all in all I'm happy to leave it be. If it were a bigger outstanding amount though I'd definitely consider it.

Gotcha. That makes sense. May I ask roughly how many years are left on the loan? Sounds like you're in great financial shape! BTW, here's a calculator which helps you determine whether it makes sense to refinance taking into account the term left on your current note. http://www.mortgage101.com/refinance-calculator Obviously though this doesn't take into consideration the coming potential/probable increases in the variable rate.

 

[mscriv]

We just locked in on a 30 year refinance at 4.25% and are waiting for the appraisal to make sure everything's a go. We built our home about 5 years ago in a new subdivision and at the time did an 80-20 loan to avoid having a down payment and as escrow. We are now combining the loans into an FHA and will see significant savings since the current loans are at 9.8% and 6.1%. The only problem is with the new loan we will pick up an escrow and private mortgage insurance. This means our monthly payment will actually go up a little bit, but we won't have to save all year to pay our property taxes on our own. So, all in all, this will be much better for us.

You are definitely right about this being a good time to refinance. But always keep in mind it's only a smart thing to do if you intend to remain in your home for another 3-5 years.

 

[Queso]

Should be all paid up by September 2014

If everything goes to plan of course. I don't know what happens then. Probably just stick the same amount that pays the mortgage every month into a savings or investment plan and keep on accumulating. I'm not wanting to retire early or anything like that since I get bored quickly if unoccupied, but I like the idea of choosing to work rather than having to.

That HELOC thing sounds a bit like the Tracker accounts we have over here. Is it like a current account with a massive low-rate overdraft that you pay down as part of your normal monthly cycle of spending? Those are brilliant for getting the mortgage paid in record time. Saves you a fortune in interest.

 

[Gregg2]

We cut a point off our rate about a year ago. We went with a 30-year loan to get the payment lower than a new 15 would have given us. Now that we're able to, we'll pay down the principle. We can still pay it off as soon as we would have before refinancing. Then we will have zero debt. Yea!

 

[bobr1952]

I am in the process of doing this right now. I have a very old loan and have just been too lazy to go to the bank and get a better interest rate. But I've finally taken to plunge and plan to pay off my Line of Credit, take out a little bit of equity and lower my monthly payment--with an interest rate of 4.25. Please keep in mind as you read any of these posts, that every situation is different. What works for one household is not right for the next and totally wrong for the third. Everyone has their own unique situation with their own unique solution. My current loan is with Chase--and the local bank where my neighbor is the loan officer is now Chase (when they bought WaMu). So this seems to be the route with the less hoops for me.

Things are moving along fine but the appraisal was less than I had hoped. Just par for the course with this bad housing situation. My neighbor's house is for sale (been for sale for close to a year). They bought at $359,000 in 2005 and now are asking $200,000. But fortunately I still have equity in mine.

 

[maflynn]

I'm 5 years into my mortgage at 5.875%

While on paper it would be an ideal time to refinance, my main concern is resetting that 30 year clock. I'm in my mid forties and I don't want this mortgage hanging over my head while I'm 75.

I could refi with a 20 year loan and shave 5 years off the term of my loan. The mortgage payments will be about the same, but it will cost me between 2,000 and 3,000 for the mortgage. If i try a no-fee, no closing cost mortgage, then the interest goes up and my payments will exceed what I'm paying now.

Cash flow for my family is the primary concern and so for the life of me, I cannot bring myself to take the plunge.

 

[jknight8907]

I'm 5 years into my mortgage at 5.875%

While on paper it would be an ideal time to refinance, my main concern is resetting that 30 year clock. I'm in my mid forties and I don't want this mortgage hanging over my head while I'm 75.

I could refi with a 20 year loan and shave 5 years off the term of my loan. The mortgage payments will be about the same, but it will cost me between 2,000 and 3,000 for the mortgage. If i try a no-fee, no closing cost mortgage, then the interest goes up and my payments will exceed what I'm paying now.

Cash flow for my family is the primary concern and so for the life of me, I cannot bring myself to take the plunge.

Nothing would prevent you from paying it off early. However, if your mortgage is as much of a burden (high percent of your income) as your post implies, you may be better served to downsize to something smaller and pay it off in 10 years. Then you'd have much more free to save for retirement.

 

[RaceTripper]

Going from a 30 yr. @ 4.875% to a 20 yr. @ 4.00% and will close in two weeks or so. Monthly payment goes up about $250, but I'm doubling up on my principal payments & will save some $160K over the life of the loan.

 

[fivepoint]

Should be all paid up by September 2014

If everything goes to plan of course. I don't know what happens then. Probably just stick the same amount that pays the mortgage every month into a savings or investment plan and keep on accumulating. I'm not wanting to retire early or anything like that since I get bored quickly if unoccupied, but I like the idea of choosing to work rather than having to.

Brilliant. I like it.

I'm 5 years into my mortgage at 5.875%

While on paper it would be an ideal time to refinance, my main concern is resetting that 30 year clock. I'm in my mid forties and I don't want this mortgage hanging over my head while I'm 75.

I could refi with a 20 year loan and shave 5 years off the term of my loan. The mortgage payments will be about the same, but it will cost me between 2,000 and 3,000 for the mortgage. If i try a no-fee, no closing cost mortgage, then the interest goes up and my payments will exceed what I'm paying now.

Cash flow for my family is the primary concern and so for the life of me, I cannot bring myself to take the plunge.

Very interesting how everybody's situation is different. Sounds like you've weighed your options. I've always been a proponent of getting in a house which will leave you enough flexibility to choose a wide variety of financing options... but that doesn't work in every situation. Like jknight says though, you don't want your payment to be too much of a burden and to keep you from other investments you need for retirement, etc.

 

[Gregg2]

I'm 5 years into my mortgage at 5.875%

While on paper it would be an ideal time to refinance, my main concern is resetting that 30 year clock. I'm in my mid forties and I don't want this mortgage hanging over my head while I'm 75.

Cash flow for my family is the primary concern and so for the life of me, I cannot bring myself to take the plunge.

Do you expect your income to increase over the next 10-15 years? You're almost always better off paying less interest.

 

[4JNA]

...I could refi with a 20 year loan and shave 5 years off the term of my loan. The mortgage payments will be about the same, but it will cost me between 2,000 and 3,000 for the mortgage. If i try a no-fee, no closing cost mortgage, then the interest goes up and my payments will exceed what I'm paying now...

sound thinking, and a valid point. if i were in that spot (i'm in a similar spot...) i'd take the $3000 and divide it up over the 5 years you would save and end up in a similar position without all the hassle and paperwork and the big cash outlay.

5 years x 12 months = 60 payments. $3000 / 60 = $50 extra toward principle per month. paid off before retirement age = priceless!

best of luck.

 

[GoCubsGo]

I always tell people if you're going to refinance figure out what the savings is over the term of the loan, if it's less than the cost of refinancing (paying the closing fees) then do it. If not, you're better off in the loan you have.

 

[samiwas]

I've been wondering if I should look into refinancing, but I'm thinking it's just not worth it at this point. I'm 5 years into a mortgage at a whopping 7% interest rate (thanks, jerk mortgage broker for forgetting to lock in the rate). It was also ridiculously hard for us to get a loan (even in the middle of the bubble) due to our freelancer status. Hard to the point that I almost just bowed out of the whole thing and stayed a renter.

We don't plan on being in this house for much longer if we can swing it, so I guess it would be a bad idea to refinance now, even though rates are low. Another big issue is that our house has lost significant value in the past 5 years. I could sell it now for MAYBE 75% of what I paid for it (based on what the remainder of the new homes are selling for).

In other words, "blah".

 

[maflynn]

Nothing would prevent you from paying it off early. However, if your mortgage is as much of a burden (high percent of your income) as your post implies, you may be better served to downsize to something smaller and pay it off in 10 years. Then you'd have much more free to save for retirement.

It's not a burden now, but once I reach retirement age it could be if I don't plan on having it paid off. That's why it makes little sense to opt for a 30 year loan now. I know I'll not be making the same type of money in my 70s that I'm making now. Cash flow is more important currently then trying to pay down more principal. I have two kids and their needs supersede ours

Like jknight says though, you don't want your payment to be too much of a burden and to keep you from other investments you need for retirement, etc.

The wife and I always strived not to be house poor. Our mortgage is doable, and while we could possibly benefit in the short term by refinancing, it would have a negative impact on the long term. The idea of lowering my payments with a 30 mortgage and then paying extra isn't a feasible option because there's ways a pressing issue that seems to take our money away.

Do you expect your income to increase over the next 10-15 years? You're almost always better off paying less interest.

No, not in this economy. Of course, but refinancing is not always feasible. Why spend thousands of dollars that we really don't have to maintain the same level mortgage payment - actually to have a higher mortgage payment because interest rates are climbing. Yes, I can shave off 5 years of my mortgage, but I can do the same by paying an extra xxx.xx a month.

I always tell people if you're going to refinance figure out what the savings is over the term of the loan, if it's less than the cost of refinancing (paying the closing fees) then do it. If not, you're better off in the loan you have.

You also need to consider how long do you plan on staying in the house. Why spend 2,000 to 3,000 in refinancing fees to save an interest point, when you'll be selling the house in a couple of years

 

[fivepoint]

Yes, I can shave off 5 years of my mortgage, but I can do the same by paying an extra xxx.xx a month.

Very true. A lot of people don't think about this. Just making extra payments to principal each month with your 30 year loan can turn it into a 20 year loan pretty easily! A good alternative for people who can't handle big upfront refinancing costs or don't want to add years to their loan.

 

[RaceTripper]

Very true. A lot of people don't think about this. Just making extra payments to principal each month with your 30 year loan can turn it into a 20 year loan pretty easily! A good alternative for people who can't handle big upfront refinancing costs or don't want to add years to their loan.

It takes a lot of discipline to stick to that, so doing a refi can be the better option for a lot of people.

 

[Gregg2]

I always tell people if you're going to refinance figure out what the savings is over the term of the loan, if it's less than the cost of refinancing (paying the closing fees) then do it. If not, you're better off in the loan you have.

I'm reading "if the savings (it) is less than the cost, then do it.

It takes a lot of discipline to stick to that, so doing a refi can be the better option for a lot of people.

"That" being paying against the principle. . . Discipline? Set up an automatic transfer. You won't adjust it because it's not convenient.

We make a lump sum extra payment once a year just for the thrill of seeing several years shaved off the term with one check! The only time we missed was due to being out of work.

 

[RaceTripper]

"That" being paying against the principle. . . Discipline? Set up an automatic transfer. You won't adjust it because it's not convenient.

Yes, I meant principal payments. Still, refi is better for many who just don't have the discipline to stick to extra payments, auto transfer or not. It's not for everyone. I have the discipline to make extra principal payments, but I like the convenience of just having the appropriate mortage terms for me. It's never an issue.