Refinancing: Worth It?

[Tenspro2002]

Personal finance experts of the BY: is it worthwhile to refinance a mortgage that I just took out last year?

I'm paying 4% interest on a 30-year mortgage right now, but could potentially refi down to 3% (also 30 years) and reduce the monthly payment by $200.

Depending on how long I take to pay it off, I could save somewhere in the ballpark of 25K in interest over about 20 years. Mortgage interest tax deduction isn't likely to be a factor. Closing costs would be 5K.

FWIW, turning 5K into 25K over 20 years is equivalent to a 9% annual return, which seems pretty good.

Should I go for it? Anything seem out of line?

TIA.

 

[temery]

Just finished a refi. 4.3 % to 2.75%. Saving $500 a month ( which I already have been spending on bourbon so kinda a break even).

What you need to do is plan on being an alcohol consultant. Post here in the beer thread, or start your own. Then you can write off your booze as a business expense.

 

[HuskyHawk]

What you need to do is plan on being an alcohol consultant. Post here in the beer thread, or start your own. Then you can write off your booze as a business expense.

Ha. If you get paid to do it enough to write it off against those earnings. I'm friends with one of the most known internet booze reviewers and even he doesn't pull that off.

 

[temery]

Ha. If you get paid to do it enough to write it off against those earnings. I'm friends with one of the most known internet booze reviewers and even he doesn't pull that off.

In 2020 alcohol should be considered an acceptable business expense.

 

[ZenConn]

How long did the process take?

I started on Sept 10th and was just funded yesterday. Honestly I dragged my feet for a few tasks which would have knocked a few days off of this.

 

[ecasadoSBU]

Using better.com to refi my multi-family investment in JC, NJ. Should be closing by the 15th of this month.

Thanks to this thread I got into the idea of refi and I will be able to get rid of the FHA monthly MI, shaved 6.5 years off the term (from 26.5 to 20) , and still saving about $300 per month. Was able to catch a 3.0% rate (went down from FHA 4.25%). It wasn't the lowest rate but I tried to minimize closing costs so I'll be paying about 1.7k cash to close. Better.com makes the process a lot smoother than I thought.

Thanks to whoever recommended the site here in the previous pages. Great experience so far. I hope my closing goes without any hiccups

EDIT: I see some people essentially got paid to refinance. That is freaking awesome. I wonder if loan size has something to do with it. I still have 498k payoff. My refi will cost about $1.7k which isn't bad IMO, but I'm glad others have gotten paid to do it. What a great deal that must be!

update: After closely looking into the CD I realized they include Q4 of property tax in the closing costs which amounts to $2k. That means that after reviewing things well... even though i'm paying $1.7k in closing costs when you subtract $2k i'm in effect also get paid to re-finance too. That made my day. lol.

I just found out that apparently I don't have to make a payment till December 1st which is even better.

Its amazing the times we are living in with extremely low interest rates. Those that have studied finance know very well that in the 1980s we had 15-20% interest rates. I would say go to better.com if you have the chance and at least look at the rate they provide you. They are very transparent. It only takes a few minutes

 

[Scot-e]

What you need to do is plan on being an alcohol consultant. Post here in the beer thread, or start your own. Then you can write off your booze as a business expense.

Genius.

 

[JonnyRI]

I just took a 15 yr refi. Paid 3 points but got me a 1.75 rate. Apr of like 2.3. No joke. Best apr I could get. Will be in my house for at least another 10 years so a no brained as only need 4 years for the savings to offset the points.

 

[JonnyRI]

Looking to refinance from 30-year (with 25 yrs left) to a 15-year while rates are much lower than ours and hoping for as little upfront cost possible. Is LenderFi, Better, LendingTree or seeing what existing mortgage company can do the best play to start here?

I just used quicken loans rocket mortgage and was super easy. I had 22 years left on a 30 and refi to a 15.

 

[cap10dingus]

Personal finance experts of the BY: is it worthwhile to refinance a mortgage that I just took out last year?

I'm paying 4% interest on a 30-year mortgage right now, but could potentially refi down to 3% (also 30 years) and reduce the monthly payment by $200.

Depending on how long I take to pay it off, I could save somewhere in the ballpark of 25K in interest over about 20 years. Mortgage interest tax deduction isn't likely to be a factor. Closing costs would be 5K.

FWIW, turning 5K into 25K over 20 years is equivalent to a 9% annual return, which seems pretty good.

Should I go for it? Anything seem out of line?

TIA.

Look at a 15. Rates are usually significantly lower and because a big chunk of your monthly mortgage payment goes to taxes and fees it really doesn't make your mortgage crazy. We are going from 28 years left to a 20 right now. Wanted a 15 but the payment was too much of a stretch for us. Any term over 20 might as well be a 30. Most mortgage companies will allow you to match your current term as well so if you have 28 years left you can do a 28 instead of a 30. Stretching your mortgage back to 30 years and/or taking cash out of your home are two of the biggest financial mistakes people make today. Hope this helps!

 

[Tenspro2002]

Look at a 15. Rates are usually significantly lower and because a big chunk of your monthly mortgage payment goes to taxes and fees it really doesn't make your mortgage crazy. We are going from 28 years left to a 20 right now. Wanted a 15 but the payment was too much of a stretch for us. Any term over 20 might as well be a 30. Most mortgage companies will allow you to match your current term as well so if you have 28 years left you can do a 28 instead of a 30. Stretching your mortgage back to 30 years and/or taking cash out of your home are two of the biggest financial mistakes people make today. Hope this helps!

Well, we already went ahead with it. We're doing the 30 year (we had 28 years left on our current 30-year anyway), but with the intent to pay extra principal along the way and pay it off in 20. Getting the 20-year wouldn't have come with a better interest rate, and the tradeoff with the 15 is a lot less flexibility for a slightly better rate, not worth it.

Appreciate the advice anyway.

 

[UConn Esq]

I bought a house in December 2019 at 3.6% over 30 years and am closing today on a streamline refinance, which sends me back to 30 years but at 2.8%. Saves me about $400 a month going forward

 

[auror]

Downside to a 15 year is the opportunity cost of investing the difference you're paying into mortgage instead of investing (at almost certainly a better return than the interest payment). Plus 30 years allow you to pay it in 15 if desired, whereas you can't pay a 15 in 30 if you come on harder times.

 

[huskiesNhoos]

Well, we already went ahead with it. We're doing the 30 year (we had 28 years left on our current 30-year anyway), but with the intent to pay extra principal along the way and pay it off in 20. Getting the 20-year wouldn't have come with a better interest rate, and the tradeoff with the 15 is a lot less flexibility for a slightly better rate, not worth it.

Appreciate the advice anyway.

I think this gets overlooked by many. Sure you can get a slightly lower rate or pay a bit less points with a shorter term loan, but it can be risky based on the current state of the economy, job markets etc. Forces you into a higher monthly payment whereas if you just stick with a 30yr you can always make extra principle payments and effectively reduce your loan term and total interest paid. Allows for more financial flexibility since you can decide what to do with the extra money you save on your monthly payment: invest it, donate it to charity, buy more booze...

Obviously situations are different for everyone, but just some food for thought.

 

[casual-yardin]

I think this gets overlooked by many. Sure you can get a slightly lower rate or pay a bit less points with a shorter term loan, but it can be risky based on the current state of the economy, job markets etc. Forces you into a higher monthly payment whereas if you just stick with a 30yr you can always make extra principle payments and effectively reduce your loan term and total interest paid. Allows for more financial flexibility since you can decide what to do with the extra money you save on your monthly payment: invest it, donate it to charity, buy more booze...

Obviously situations are different for everyone, but just some food for thought.

This. Get you 30 year payment as low as possible and send the savings to 401k's, 529's etc. Borrowing at sub 4% for 30 years is as close to free money as you are going to get.

 

[3rdbass]

This. Get you 30 year payment as low as possible and send the savings to 401k's, 529's etc. Borrowing at sub 4% for 30 years is as close to free money as you are going to get.

Sub 4% lets try sub 3%.

 

[Tenspro2002]

I think this gets overlooked by many. Sure you can get a slightly lower rate or pay a bit less points with a shorter term loan, but it can be risky based on the current state of the economy, job markets etc. Forces you into a higher monthly payment whereas if you just stick with a 30yr you can always make extra principle payments and effectively reduce your loan term and total interest paid. Allows for more financial flexibility since you can decide what to do with the extra money you save on your monthly payment: invest it, donate it to charity, buy more booze...

Obviously situations are different for everyone, but just some food for thought.

Bingo.

And yes, we're looking at 2.875%, down from 4%.

With rates this low, we don't fear interest -- the extra flexibility is super cheap.