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

[DaddyChoc]

good stories... bad stories?
Lets say my rate was 7.5% with bad credit 680... now its 8yrs later and my score is 750. Can I be helped and would it be worth it. Home mortgage was 140K now its down to $117K

This is the place for knowledgeable responses...

 

[MilfordHusky]

Yes, you can move to a 15-year mortgage at 4% or less and save a ton of money. If you need cash, you could take cash out too.

 

[CL82]

Interest rates are moving upwards due to the Fed raising rates couple with signals that it plans future increases. If you think the current economic trend will continue, refinancing sooner rather than later makes sense. Google "refinance calculator" and you should get a number of online apps that can show you what your potential costs are.

It may make more sense to a modification with your existing lender, rather than a new loan. You'll save some costs but likely be charged a modification fee. I'd check it both ways.

Keep in mind that you have options. The longer you extend your term the lower your monthly payment will be, but it will increase the total cost of your loan. Again I'd look at a few different ways and pick the one that makes the most sense to you.

 

[j66kicker]

Yes you can and yes it would. Just be sure you always refinance to a shorter term loan than the remaining years on your existing mortgage. If you had 22 years left and you refinanced to a new 30-year loan, then you would end up paying interest on a theoretical 38 total years. Bad business, even if you aren’t really going to keep the loan/house 38 years, because the interest is very front-loaded - in the beginning years of the loan your payment is mostly interest. You should be able to get a 15-20 year loan for around 4%.

 

[Bama fan]

Mortgage rates vary, often according to your zip code. There are several on line calculators and you can plug in your numbers. Your credit score of 750 should be fine. Good luck, and make a quick but informed decision, as rates will be rising soon. 15 years at 5% or less is within your grasp.

 

[HuskyPhan]

For maybe the first time ever, I'm qualified to answer a question on this board I've been a mortgage loan officer for 30 years and you should absolutely refinance!! As others have mentioned, exactly what direction you go depends on what you are trying to accomplish-lower rate or lower payment? If you can handle a 12 year amortization I highly recommend Charter Oak Credit Union's (based in SE CT) Accelerator mortgage (no, I don't work for them) which has only an appraisal fee and has an excellent rate which will be fixed for 12 years-good luck!!

 

[tomcat]

We refinanced once and it was a very positive experience. It was back when the HARP plan was in effect. We took our 30-year mortgage (which we had paid three years on) at something like 4.65% and refinanced to about 3% for 20 years. Our payments stayed roughly the same and we reduced the payment time (and the amount of total interest we would pay) considerably. When we sold the house, we had a lot more equity in it than we would have otherwise.

 

[Bigboote]

I think I've refied four or five times, taking my interest rate from 8 to 2.5. The rule of thumb is that you'll make out if you gain around 0.75 percentage points. There are online amortization calculators you can use to see how long it will take you to recoup any closing costs.

Along the lines of HuskyPhan, my one recommendation would be to refi through a local bank rather than an online broker. We did it through an online broker once, and that was the only bad experience we've had.

 

[FanFromMaine]

good stories... bad stories?
Lets say my rate was 7.5% with bad credit 680... now its 8yrs later and my score is 750. Can I be helped and would it be worth it. Home mortgage was 140K now its down to $117K

This is the place for knowledgeable responses...

Let me add another alternative for you to consider. But first, congrats on improving your credit score. It's a long process and you seem to have been able to get there.

The conventional wisdom about home ownership is that you should pay off your mortgage as soon as possible. My sense is that it is very comforting for most people to own their own home outright. And the quick analysis is that you have saved a bunch on interest costs. But fiscally, that is not always the way to go.

First, the money you borrow on your home is the cheapest money you can "buy." Not only is the interest rate lower than other commercial loans but the the interest is tax deductible. Say you're in the 20% tax bracket and have a 5% interest rate, your "actual" rate of interest in only 4%.

Second, you have to take a look at the "opportunity" money that you are losing if you pay off your home. House prices are fluid as we all know by now and not always rising. If you pay off a $100,000 mortgage, then the earning power of the $100,000 of equity sitting in your home depends on the housing market. If you use that $100,000 (or portion thereof) in the market, it too may go up and down but history tells us that the market earns a better rate of return than home ownership does.

Third, money depreciates over time due to inflation. The money you owe today will be worth less in the future. So, while you are paying more interest with a longer mortgage, the money you will be using later to pay back the loan will be cheaper.

So, my suggestion is: if you are comfortable without paying off your house quickly, see if you can refinance at a lower rate (I agree with finding a bank loan at least 0.75% less than you have now) but keep a 30 year mortgage. With the money you are not spending to pay down your loan fast, invest with a broker like Vanguard (no, I don't work there) where you can buy an exchange-traded fund (ETF) which spreads the risk among many stocks or bonds.

Good luck.

 

[RockyMTblue2]

good stories... bad stories?
Lets say my rate was 7.5% with bad credit 680... now its 8yrs later and my score is 750. Can I be helped and would it be worth it. Home mortgage was 140K now its down to $117K

This is the place for knowledgeable responses...

Rob a couple of well cased banks and pay it off! Seriously, I have always found a good independent mortgage broker the best for giving you near instant sound market analysis and advice. Key word: GOOD and INDEPENDENT and you fall in to it by asking around locally with people you trust.

Using the calculators on line will get you a ton of frustration and a lot of junk e-mails and ads as you surf the internet.

 

[j66kicker]

But fiscally, that is not always the way to go.

First, the money you borrow on your home is the cheapest money you can "buy." Not only is the interest rate lower than other commercial loans but the the interest is tax deductible. Say you're in the 20% tax bracket and have a 5% interest rate, your "actual" rate of interest in only 4%.

Second, you have to take a look at the "opportunity" money that you are losing if you pay off your home. House prices are fluid as we all know by now and not always rising. If you pay off a $100,000 mortgage, then the earning power of the $100,000 of equity sitting in your home depends on the housing market. If you use that $100,000 (or portion thereof) in the market, it too may go up and down but history tells us that the market earns a better rate of return than home ownership does.

Third, money depreciates over time due to inflation. The money you owe today will be worth less in the future. So, while you are paying more interest with a longer mortgage, the money you will be using later to pay back the loan will be cheaper.

So, my suggestion is: if you are comfortable without paying off your house quickly, see if you can refinance at a lower rate (I agree with finding a bank loan at least 0.75% less than you have now) but keep a 30 year mortgage. With the money you are not spending to pay down your loan fast, invest with a broker like Vanguard (no, I don't work there) where you can buy an exchange-traded fund (ETF) which spreads the risk among many stocks or bonds.

Good luck.

Although the interest is technically still tax deductible, the new dramatically-higher standard deduction ($24,000 for married filing jointly for 2018) has basically eliminated interest deductibility as a factor for a huge portion of homeowners. Not that it's a bad thing - you're basically getting the tax break anyway now, whether you have any deductible interest or not. But tax deductibility of mortgage interest has become a non-factor for many if not most of the middle class.

 

[Bronx23]

For maybe the first time ever, I'm qualified to answer a question on this board I've been a mortgage loan officer for 30 years and you should absolutely refinance!! As others have mentioned, exactly what direction you go depends on what you are trying to accomplish-lower rate or lower payment? If you can handle a 12 year amortization I highly recommend Charter Oak Credit Union's (based in SE CT) Accelerator mortgage (no, I don't work for them) which has only an appraisal fee and has an excellent rate which will be fixed for 12 years-good luck!!

I've been a real estate broker for 25 years, after my social work / therapy career.
All of the advice given here is spot on!
My question is how old are you and are you still working for awhile longer or retired.
If you can afford the payments if go with as short a term as you can afford asap as rates are only rising.
I've refinanced quite a few times to help pay for college, buy a second home, but five years ago got a 3% mortgage for 15 years st a comparable payment to my higher rate 30 year loan and if I live another less than ten years, the house will be finally paid off.
It will also allow my wife to finally be able to give something substantial to my son and daughter when we pass away!
Lots of issues, lots to think about but analyze your own situation and needs and pull the trigger!
Bronx23

 

[huskeynut]

We have refinanced a few times over the years. Our second home purchase was during the Carter years when interest rates skyrocketed up. The best mortgage deal was a variable rate starting at 16.8% for 30 years. Three years later we refinanced to a lower fixed rate but still at 30 years. As interest rates started to drop, we refinanced that house two more times over 15 years. First for 20 years and then for 15 years. Except for the first mortgage on the house, we did all our mortgages with a locally owned bank. We also transferred all our accounts to the same bank.

When we sold that house and bought a bigger one, we used "our" bank and got a fair deal. Four years later we refinanced because rates had dropped.

So if you can refinance, do it. Again, its a short term gain (monthly payments) and a long term gain (total amount paid over life of the loan).

 

[DaddyChoc]

I'm 15yrs before 65... and these post are very encouraging, haven't read one bad thing about refinancing

 

[DaddyChoc]

is there a way to get out of the PMI deal with a new mortgage loan let's say after 5 yes. Is there a difference between CHFA (may be a CT thing) and a Conventional loan?

 

[CL82]

Fed raises rates, sees at least 3 more years of economic growth

 

[Bigboote]

is there a way to get out of the PMI deal with a new mortgage loan let's say after 5 yes. Is there a difference between CHFA (may be a CT thing) and a Conventional loan?

You shouldn't pay PMI if your loan-to-value is less than 80%. I once got a loan without PMI with 10% down (I doubt they do that now, but you never know). So if you've paid down or your property has appreciated, you may not need to pay it.

Fed raises rates, sees at least 3 more years of economic growth

Mortgage rates are tied to US bond rates rather than the Fed rate, which is for short-term loans. Mortgage rates are going up because investors are skittish about the national debt.

 

[CL82]

Mortgage rates are tied to US bond rates rather than the Fed rate, which is for short-term loans. Mortgage rates are going up because investors are skittish about the national debt.

Agreed, but the Fed's increase of the prime lending rate will push interest rates up just as the QE I and II made borrowing money very affordable.

 

[DaddyChoc]

You shouldn't pay PMI if your loan-to-value is less than 80%. I once got a loan without PMI with 10% down (I doubt they do that now, but you never know). So if you've paid down or your property has appreciated, you may not need to pay it.



Mortgage rates are tied to US bond rates rather than the Fed rate, which is for short-term loans. Mortgage rates are going up because investors are skittish about the national debt.

I'm wondering about refinancing and would the PMI follow me into a newly refinanced loan?

 

[MilfordHusky]

I'm wondering about refinancing and would the PMI follow me into a newly refinanced loan?

If you can get to 20% equity, you should be able to avoid mortgage insurance.

 

[DaddyChoc]

refinanced on my 4.5% 20yrs left mortgage to 15 years at 2.79%... saving about 30k

 

[Wbbfan1]

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.

 

[bluedevil]

Paying more interest than is necessary makes the bank richer and you poorer. Banks are not and never will be your friend. ...Best of luck...Let us know your decision...

 

[HuskyPhan]

Yes, finally a topic on BY that I'm an expert on! I've been a residential loan officer for 30 years The COVID 19 pandemic has greatly affected all financial markets and the mortgage world has not been immune to that. We have record low interest rates right now because the Feds are buying $30 Billion in mortgage backed securities (MBS) EVERY DAY during this crisis to keep the mortgage market liquid and moving. It's very difficult to make a blanket statement on if it is worth it for you to refinance without knowing a bunch of variables that affect your personal financial situation and goals. For some people with lower mortgage amounts who want to do a 15yr or shorter term, there are local community banks that offer these refis with little or no closing costs. Otherwise you are looking at $2000-3000 in hard closing costs dependent on your mortgage balance. Feel free to PM me with any questions

 

[Minicoop69]

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.

 

[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.