OT: refinancing a home, whats the "point"?

[uconnfan68]

First, I do not have a mortgage and I have not had one for many years. However, when I was young, I did have a mortgage. And, I moved many times and had many new mortgages as each home was sold for the purchase of a new home. I have refinanced a mortgage if and only if their was a compelling financial incentive, did not cost me any out of pocket money, I had a lower payment, only re-financed the balance of the original mortgage, and had a significant lower interest rate. My objective was to have no mortgage and pay off this existing loan, so that my home was my equity savings for future investment. Any savings in payment realized was used to pay the mortgage principal in addition to the required payment. Just saying, Connecticut, was the most expensive place that I have lived in my own home when I was stationed in Groton for many years. However, it gave me the biggest return on home price during the 80's. Even when you pay off your mortgage, you still are a slave to government because they hammer you for property taxes so make sure you factor that into your home refinance as well. Proportionally, I pay more for my home outside San Antonio, than I do for a 5000 acre ranch that is my main residence in New Mexico. Crazy.

I was stationed there (Sub Base) from 1971 to 1974. Ship's company, training department. Played against Marine teams in softball and basketball.

 

[dvegas]

For all of those who are of the "I don't want a mortgage" opinion, with interest rates this low, assuming your income is below the threshold for taking mortgage interest as an itemized deduction for tax purposes, it makes the effective interest rate even lower. Every dollar of itemized deductions would have been taxed at your highest effective income tax rate. Combine that with the ability to get a return on that money even slightly above the mortgage interest rate, you've got a reason to keep debt on your home(s)

 

[uconnfan68]

For all of those who are of the "I don't want a mortgage," with interest rates this low, assuming your income is below the threshold for taking mortgage interest as an itemized deduction for tax purposes, it makes the effective interest rate even lower. Every dollar of itemized deductions would have been taxed at your highest effective income tax rate. Combine that with the ability to get a return on that money even slightly above the mortgage interest rate, you've got a reason to keep debt on your home(s)

Unfortunately, those of us in the Northeast and West Coast are stung by SALT limits. Can only take the standard deduction. I lost a little, but many lost a lot.

 

[DaddyChoc]

Yes, there's a lot of good reasons to refinance a Home Mortgage when the interest rates change warrant it. However, from what I've read and had friends experience, what some do when the refinance go out buy new cars, remodel kitchens etc. So instead of reducing their debt they end up at the same level and sometimes even more in debt. The ideal situation would be to refinance your home loan to reduce your overall debt. However instead of only paying the new lower monthly mortgage, pay the payment at the same amount that you've been paying in many cases for years. Thus paying off the new mortgage earlier. The exception I would make is if there is other debt, then apply the complete difference between the old and new monthly payment to existing debt until its paid off.

just foolishness...

 

[DaddyChoc]

I am in the process of refinancing my mortgage. Currently have a 15 yr with 3% interest with 7.5 years left. Refinancing to a 15 yr with 2.75%. Yes I'm adding 8 yrs, but need the money for much needed roof and HVAC equipment. Payment will be the same and adding much needed value to the house after all is said and done.

interesting

 

[DaddyChoc]

Normally rule # 1 for refinancing is, "Don't refinance for longer than the time that remains on your current loan." There would be a long payback on the .25% interest you're saving, so it sounds like the money you're "saving" is coming from stretching out your loan term to lower the payment. If that's what you want/need to do, fine, but for normal refinancing to save interest, adding years to your loan defeats the purpose.

totally agree... I knocked off 5 yrs and will be paying 60-80.00 a month more, along with some extra principle when I can. Not bad in my opinion