Should I refinance my mortgage?

[wavinwayne]

My wife and I purchased our current home in July 2007, on a 30-year fixed rate home loan. Yearly property taxes and homeowner's insurance are handled through an ESCROW account, which is included in our monthly mortgage payment. I don't have the loan documents in front of me at present, but IIRC, the interest rate is 6.875%. We paid 20% down, to avoid paying PMI.

If we wanted to re-finance now to lower our monthly payment, how much of an interest rate drop would we need to get, in order for the re-fi to make good sense financially? What type of up-front fees should we expect, if we decide to go forward?

 

[Quattro Pete]

If you haven't already, do a google search on when to refinance a mortgage - there are some good tips and calculator tools.

From what I've heard, unless you can get a new rate that is more than 1% lower than your current rate, it is usually not worth the hassle.

In addition, check if there are any early termination penalties on your current loan that may make the refinancing costs prohibitive, considering that you only had this loan for a year.

 

[duaneb9729]

also check with the person that does your taxes

 

[mechtech2]

It also depends on how much they whack you for any fees when you refinance. This has to be known to make a decent decision.

 

[Turk]

Dude.

Go to a 15 year fixed or add the difference to the principal every month if at all possible..........

You'll save a TON of money.

 

[HTSS_TR]

You should looking for no cost refinance. Few years ago I did several times as soon as interest rate for no cost refinance 0.5% below my current rate at that time.

At first, it was 7.5% fixed and I ended up with 5.5% fixed after 4-5 refinances without paid any money out of pocket nor increasing the loan amount.

 

[Steve S]

Look at the cost of the new loan [fees etc] then the interest rate .It then shouild be easy to figure the payback for the fees the the interest savings. You are not going to take extra mpney out I hope.

 

[PandaBear]

This is yet another reason most people should get a no cost/fee mortgage so that he/she can refi anytime without a string tie to you.

 

[Gary Allan]

Figure a 8-10% cost penalty.

You're trying to lower a payment ..but your debt line will go up and your finish line will be extended.

Not worth it unless you're carrying a tremendous consumer credit load. Even that makes little sense to finance that over 30 years @ 300% ultimate costs.

 

[Pablo]

I doubt there are termination penalties, nor will it cost you 8-10%.

1% is a rule of thumb.....cost depends on how long you plan to stay in the house. I'm thinking you can get 5.5% or so, and then see if you can get zero fees, etc....

I would say if you plan to stay it will be worth it...IF they don't tack on a lot of trash fees.

 

[Gary Allan]

None of my % figures have any sweet money involved.

You show me a fee-less refi and I'll eat my hat.

It will surely vary by states ..but land title insurance ..various filling fees ...every time I ran the numbers ..it came out to around 8% or more.

There's also no difference (typically) with or without points ..that's in the ultimate payment end of things anyway. The only reason to pay points for a lower rate is if you want to sell the property with the buyer assuming the mortgage ..assuming that your lender is selling you an assumable mortgage.

 

[tom slick]

how long do you plan to live there?

what is the new interest rate you are looking at?

 

[pbm]

Why be RESPONSIBLE? Why don't you just stop paying your mortgage altogether and the goverment might bail you out. It seems to work for others. I heard that some people who were behind on their mortgages were given lower rates by the lender.

 

[ZZman]

1-1 1/2 percent. If you can keep the payment the same or drop it sightly lower try a 15 or 20 yr mortgage.

 

[Gary Allan]

Oh ..an appraisal and whatnot is in the application fee if not included in the closing costs.

Given our bubble bursting, are you sure you'll still make 20% equity.

do you intend to pull ANY money out to satisfy ANY short term consumer debt??

 

[wavinwayne]

Originally Posted By: Gary Allan
Oh ..an appraisal and whatnot is in the application fee if not included in the closing costs.

Given our bubble bursting, are you sure you'll still make 20% equity.

do you intend to pull ANY money out to satisfy ANY short term consumer debt??


Gary,

Believe it or not, the housing bubble never really existed here, nor has one burst. For the most part, the lenders here did not participate in the high-risk loans. Also, I'm in a fairly recession-resistant area (Huntsville, AL area), which Forbes magazine recently voted the #1 place in the USA to ride out the recession.

As far as pulling out money, NO way. I know what lies down that path, and I'm not traveling it. I did some looking around on my lender's website, and it seems I might be able to re-fi to a 20 year fixed rate loan for approx. what I'm paying now. I'll have to do a lot more research before deciding what to do.

Thanks everyone for your suggestions and advice.

 

[crinkles]

saw an article in the paper today about a lady who fixed her rate at 9% two years a go thinking rates will go up.

Now after about a 3% drop in interest rates she is crying foul because it will cost her $15,000 to refinance.

tough cookies me thinks. greed is nasty

 

[NJC]

I canned my fixed rate for a variable ~3 yrs ago - well worth it, even considering a $2,300 penalty. Mostly because the rate instantly dropped to 3.65% - and is currently 4.15% and should drop another .25% by year's end.