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

[j66kicker]

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.

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.

 

[uconnfan68]

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.

I refinanced in December, primarily to finally get out from being underwater since 2008. The other plus was that we knocked $500 off our monthly payment. The downside is that I’ll be 100 when I own the house.
Everyone has their own problems.

 

[tomcat]

The answer really is simple: Refi when it is worth it to you. What are your goals: Do you want to reduce the time you owe on a mortgage? This is a great way to do it. Say you got a 30-year at 4.5% a couple of years ago, and two years later find you could get a 20 year at 3.25% (I'm making up the numbers, but they're not far off) for close to the same monthly payment. Assuming the mortgage company is not gouging you with the up-front costs when you refinance (and look those costs over very carefully), this is a no-brainer. You just dropped eight years of largely-interest payments off your mortgage for about the same monthly payment. Watch how much more quickly you accumulate equity in your home this way, too. We did this on our last house and it really helped.

Or say your circumstances have changed and it'd really be helpful to have lower payments. You can refi your 30-year mortgage into a new 30-year with a much better rate and lower payments.

Just keep shopping around. One thing that has happened a lot is that many of the most aggressive advertisers -- Lending Tree and Rocket, for example, will NOT show you what your rate will be until you give them your phone number. This will subject you to at least a few calls each from really aggressive if not obnoxious mortgage salespeople who will keep you on the phone with low-rate come ons that they cannot possibly fulfill.
It used to be you could go to Bankrate.com and put your info in and you'd get a bunch of rates without giving any personal information, but not any more.

The only place I know of that will do this is the company where we got our mortgage, Aimloans.com. You can go to their page, fill out a few lines of information and other than your Zip code, you will have to give them no personal information at all and they will tell you what their rate is for at least a 30 and 15-year mortgage. As I say, I know of no one else that does this, although there probably are others. It will give you an idea of what you can get right now, without the really annoying phone calls.

Also, I believe that right now is NOT the best time to refinance, for a variety of complex reasons having to do with the way the mortgage and bond markets work. Wait a few weeks and the rate will get better, I think.

 

[Minicoop69]

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.

I definitely get it and I understand that premise. I didn't want to either, but the house needed a lot of work.

We have 2 HVAC systems in the house and they both needed replaced. Also the roof was going bad and our gutters weren't hanging on the house correctly and this getting leaks. Plus we want to install a new bathroom and remodel the kitchen. So it should be worth it, hopefully.

 

[veryolddog]

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.

 

[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