topic Re: Should I refinance? in Mortgage Loans

Should I refinance?

Anonymous — Wed, 16 Aug 2017 21:05:09 GMT

Hello,

First time poster here, bear with me!

We have a house we bought in 2012 for $165k. The market has obviously increased quite a bit since then, and Zillow and RedFin both estimate our house at about $240k. I'm not sure how much it would appraise for, I'd guess closer to $225k.

Our rate right now is 3.25%, our payment is about $1,080, we owe just over $144k and it is a 30 year loan. We are paying PMI because it was a USDA 0% down loan.

I'm wondering about refinancing. It looks like we can refinance for another 30 year for about 3.9%, but it would lower our monthly payment to under $700/month.

Alternatively, we could do a 15 year for about 3.2% and our monthly payment would be around $1,020.

I've done this all through online quotes and estimates so I know it isn't all that accurate, but if that is a ballpark, does it make sense for us to refinance? We are relatively comfortable with our current mortgage, so we could keep it the same and be just fine, but having some more breathing room would always be welcome.

I don't know anything about the costs of refinancing, other than lender fees, appraisal fees, and maybe a title/escrow fee?

Does it make sense for us to refinance?

Appreciate in advance!

Re: Should I refinance?

Anonymous — Wed, 16 Aug 2017 21:09:02 GMT

I would never refinance into a higher interest loan. That makes no sense to me.

I also would never refinance into a lower interest loan if the points and fees add up to making it cost more.

If you can refinance to a lower interest loan inclusive of points and fees, go for it.

I know a lot of folks who had cash-out refis in the past 10 years. Not all of them are homeowners anymore. On the flip side, refinancing to lower your payment but raise your interest rate just means you are buying your own house for more money from yourself, but the bank takes the profits.

Re: Should I refinance?

NC_Mtg_Loaner — Wed, 16 Aug 2017 23:46:12 GMT

refinancing is crazy if you ask me.

Re: Should I refinance?

Shooting-For-800 — Wed, 16 Aug 2017 23:55:12 GMT

Never refinance to get a HIGHER interest rate.

PMI is not expensive on that size mortgage and you can strip it when you have 20% equity.

Are you sure your new payments are including all the same things minus PMI?

Are you including closing costs? Points?

I would NEVER refinance at a higher rate unless I was deperate for cash out and could not get a good fixed rate 2nd mortgage or equity line.

Call your mortgage company and inquire about getting a new appraisal to strip PMI.

Enjoy your great current interest rate. 10 years ago you could have been at twice that.

Re: Should I refinance?

me12345 — Thu, 17 Aug 2017 16:20:25 GMT

The USDA "PMI" or Guarantee Fee as the USDA calls it, is very low, and raising your interest rate by .75% would be counter productive even with the removal of the Guarantee Fee.

Thanks,

Re: Should I refinance?

Anonymous — Thu, 17 Aug 2017 16:32:30 GMT

Thanks for advice all. It seemed like it might make sense to refinance into a 15 year to pay the loan off 10 years earlier with a similar interest rate, but I suppose not if all fees offset savings?

Thanks again!

Re: Should I refinance?

me12345 — Thu, 17 Aug 2017 16:36:01 GMT

How much is the "PMI" that you are currently paying per month?

Re: Should I refinance?

Anonymous — Thu, 17 Aug 2017 16:37:01 GMT

I believe the fees will eat up savings. You can PROBABLY pay off your current 30 year in 15 years just by adding an extra payment mid-month -- if the terms of your loan allow this.

I would definitely call the bank and ask what it would cost to remove PMI from the current loan. Then roll the PMI payment into an extra payment.

Re: Should I refinance?

Shooting-For-800 — Thu, 17 Aug 2017 19:35:18 GMT

you dont have to refinance to pay as 15 year mortgage. with your interest rate, it is not even worth the effort in most cases.

unless you are not paying interest on ANYTHING else, there is no real reason to pay a mortgage at 3-4% faster.

Worse case: borrow at 30 and pay at 15 when you can

Send in $450 extra each month to pay off in 15 years; $900 to pay off in 10 without refinancing anything.

When your wallet gets tight, you have the option of NOT sending in the extra since your payment is really $1k and not $1.4k or $1.9k

Re: Should I refinance?

me12345 — Thu, 17 Aug 2017 19:53:38 GMT

I'm estimating that the USDA "Annual Guarantee Fee" is about $70.00 per month. (This is for the life of the loan with USDA) If you accelerate your current payments so that you pay it off in 10 years (Your plan if you refi with a 15 loan) then you would pay about $8,000.00 over the next 10 years....If you could refi at the same 15 year rate (3.25%) AND if you are going to stay in the home for at least 10 years, then you would be money ahead in the long run, because it wont cost you $8,000.00 to do the refi.

If it wasn't for the USDA Guarantee Fee, I would say make the extra payments and pay it off in 10 or 15 years, but eliminating the additional fees tips the scale towards the refinance.

ONCE AGAIN ONLY IF YOU ARE GOING TO BE IN THE HOME FOR 10 YEARS OR MORE.....

Thanks,

Re: Should I refinance?

VALoanMaster — Fri, 18 Aug 2017 16:34:33 GMT

@Anonymous wrote:
Hello,

First time poster here, bear with me!

We have a house we bought in 2012 for $165k. The market has obviously increased quite a bit since then, and Zillow and RedFin both estimate our house at about $240k. I'm not sure how much it would appraise for, I'd guess closer to $225k.

Our rate right now is 3.25%, our payment is about $1,080, we owe just over $144k and it is a 30 year loan. We are paying PMI because it was a USDA 0% down loan.

I'm wondering about refinancing. It looks like we can refinance for another 30 year for about 3.9%, but it would lower our monthly payment to under $700/month.
Alternatively, we could do a 15 year for about 3.2% and our monthly payment would be around $1,020.

I've done this all through online quotes and estimates so I know it isn't all that accurate, but if that is a ballpark, does it make sense for us to refinance? We are relatively comfortable with our current mortgage, so we could keep it the same and be just fine, but having some more breathing room would always be welcome.

I don't know anything about the costs of refinancing, other than lender fees, appraisal fees, and maybe a title/escrow fee?

Does it make sense for us to refinance?

Appreciate in advance!

Hi Celticmoose,

You are comparing PI payments to PITI payments above. See lines in red.

Do Not Even Consider A Refinance!

You have a 30 year fixed rate at 3.25%! If you want to pay your mortgage off early, do yourself a favor & stay on the 30 year fixed loan & send an extra, separate payment each month to your principle.

Here's why I say this:

1) You are at least 5 years into your 30 year fixed loan. When you look at the amortization schedule you are at the point now where almost 50% (at month 60 you're at 44%) of your payment is going towards your principle! There is no reason to refi to a 15 year fixed and start all over especially if the rate isn't lower then your current rate.

2) Your MMI (monthly mortgage insurance) is only running you about $42 per month & it's going down every year because it's based on the principle balance of your loan.

That means you can actually reduce how much you pay in MMI over the life of the loan by paying down the balance faster.

3) Let's just say the closing costs to refi are going to run you $4,500. It's going to take you 9 years to recoup the $4,500 just based on you eliminating the MMI. This doesn't factor in the change in your Principle & Interest payment if you do the 30 year fixed with a higher rate. It also doesn't factor in the fact that the MMI goes down each year.

If you're comfortable with your current payment, there is no reason to change it.