Refinancing: Worth It? | Page 2 | The Boneyard

Refinancing: Worth It?

Joined
Aug 27, 2011
Messages
16,523
Reaction Score
37,245
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.
 

UConn_Top_Dog

"Your school wins games... WE WIN CHAMPIONSHIPS!"
Joined
Feb 7, 2012
Messages
1,262
Reaction Score
3,156
Keep in mind how long you are planning on staying in your home. Treat it like any other long term investment. If you are planning on possibly moving in 5 or so years I would say the costs of refinancing is not worth saving in interest. If you plan on keeping this home through the entire life of the loan then it is worth it. You should also compare the total amount you would spend until maturity if you kept the current rate and made 13 payments per year instead of 12. Sometimes making one extra payment per year would yield more savings overall than a reduced rate. Putting my UConn Real Estate and Urban Economics degree to use on the BY, wouldn’t expect that.
 
Joined
Aug 28, 2011
Messages
452
Reaction Score
1,361
Joined
Sep 24, 2011
Messages
979
Reaction Score
2,706
Refinanced in April. Went from 4.125 to 3.125 on a 30 year. Was 2.5 years into, bank actually owed me $2K at closing. I’m putting $200 a month extra into it which is coming out roughly to what our monthly payment was before the refinance - except I’ll have it paid off in 23 years instead of 30 and save about $38K in interest by paying it off in 23 years and that’s not even counting the interest I’m saving off the refinance.
 
Joined
Aug 28, 2011
Messages
5,524
Reaction Score
13,999
Closing costs are high. If you're going through a bank consider an independent mortgage guy. If you are using a broker already ask them what the costs would be for an 1/8 of a point higher.

I have always (5 or 6 times) done a "no cost" refi where I probably sacrificed the lowest rate but have never had to come out of pocket or with a higher loan amount.
Yeah, I'm thinking of doing this too. I'm presently at 3.875% and only little over 4 years but if I can get close to about 3.25% for a 30 year loan I will take it. I might even cash out a little since my house value has risen a lot. I do plan to move to Florida I think in the next 5 years or so.
 
Joined
Aug 27, 2011
Messages
2,407
Reaction Score
4,535
before you refi and possibly incur thousands of closing costs, ask the current lender if a rate modification is possible. if so, usually only a modest fee. lenders are motivated to keep the loan than lose it to another lender.
 
Joined
Aug 27, 2011
Messages
16,523
Reaction Score
37,245
Refinanced in April. Went from 4.125 to 3.125 on a 30 year. Was 2.5 years into, bank actually owed me $2K at closing. I’m putting $200 a month extra into it which is coming out roughly to what our monthly payment was before the refinance - except I’ll have it paid off in 23 years instead of 30 and save about $38K in interest by paying it off in 23 years and that’s not even counting the interest I’m saving off the refinance.

This is basically the same scenario I'm in, although I have no idea how they owed you money at closing. Either way, it's hard for this to be a bad deal.

before you refi and possibly incur thousands of closing costs, ask the current lender if a rate modification is possible. if so, usually only a modest fee. lenders are motivated to keep the loan than lose it to another lender.

I hear what you and others are saying -- the 5K closing costs seem exorbitant for what should be a trivial process. However, I'm not as concerned about minimizing closing costs (I have cash to spare) as about maximizing the total savings over 20 years.

- If I get a no-cost refinance, but only to 3.25%, I would save 18K in interest over 20 years.
- If I pay 5K to re-finance, but get 3%, I would save 36K in interest over 20 years.

Maybe the 5K now is worth more than the extra 18K spread over 20 years, but it's not obvious that that's the case.
 
Joined
Sep 20, 2012
Messages
214
Reaction Score
782
This is basically the same scenario I'm in, although I have no idea how they owed you money at closing. Either way, it's hard for this to be a bad deal.



I hear what you and others are saying -- the 5K closing costs seem exorbitant for what should be a trivial process. However, I'm not as concerned about minimizing closing costs (I have cash to spare) as about maximizing the total savings over 20 years.

- If I get a no-cost refinance, but only to 3.25%, I would save 18K in interest over 20 years.
- If I pay 5K to re-finance, but get 3%, I would save 36K in interest over 20 years.

Maybe the 5K now is worth more than the extra 18K spread over 20 years, but it's not obvious that that's the case.

You would need to get little over 7% interest over those 20 years to make hanging on to that $5K work it.
 

the Q

Yowie Wowie. We’re gonna have so much fun here
Joined
Mar 28, 2017
Messages
7,021
Reaction Score
11,243
This is basically the same scenario I'm in, although I have no idea how they owed you money at closing. Either way, it's hard for this to be a bad deal.



I hear what you and others are saying -- the 5K closing costs seem exorbitant for what should be a trivial process. However, I'm not as concerned about minimizing closing costs (I have cash to spare) as about maximizing the total savings over 20 years.

- If I get a no-cost refinance, but only to 3.25%, I would save 18K in interest over 20 years.
- If I pay 5K to re-finance, but get 3%, I would save 36K in interest over 20 years.

Maybe the 5K now is worth more than the extra 18K spread over 20 years, but it's not obvious that that's the case.

where the heck do you get no cost refinance?
 

jleves

Awesomeness
Joined
Aug 27, 2011
Messages
4,322
Reaction Score
15,740
Interest rates are insane right now. I got a 15 year 2.5% loan about 5 years ago and I thought, never going to beat that one!

Now I may have to look for a 10 year refi.
 

ClifSpliffy

surf's up
Joined
Nov 9, 2018
Messages
9,502
Reaction Score
14,287
I just finished mine this week.

I have a multi-unit which we reside in.

Initially, I got .5 points at 3.125%.

But the jackarse appraiser from rural east bum-youknowwhat came to the city and appraised at $200k below my City Assessment! Which is well below value!

So, even though loan-to-value was still good, they jacked me up to 2.125 points a week before close. LOL.

The bank was so motivated at that point that they brought me up to 3.5% at .75 points, and then took a charge against most of the points, giving me effectively .25 points.

Ridiculous, but still well worth lowering my 4.875% current mortgage.

I knew that guy was trouble when we walked into my home looking like Gomer.
'I knew that guy was trouble when we walked into my home looking like Gomer.'
on behalf of gomers everywhere, i resemble that remark. i am sooo offended. lol.

on the udder hand, this is a most excellant thread. real stories from real people. noice.
 
Joined
Aug 28, 2011
Messages
452
Reaction Score
1,361
where the heck do you get no cost refinance?

LenderFi is who I got mine from. Better, RateRabbit and LoanDepot also offer no cost refinancing, from what I’ve seen, but I have no personal experience with them.
 
Joined
Sep 24, 2011
Messages
979
Reaction Score
2,706
This is basically the same scenario I'm in, although I have no idea how they owed you money at closing. Either way, it's hard for this to be a bad deal.



I hear what you and others are saying -- the 5K closing costs seem exorbitant for what should be a trivial process. However, I'm not as concerned about minimizing closing costs (I have cash to spare) as about maximizing the total savings over 20 years.

- If I get a no-cost refinance, but only to 3.25%, I would save 18K in interest over 20 years.
- If I pay 5K to re-finance, but get 3%, I would save 36K in interest over 20 years.

Maybe the 5K now is worth more than the extra 18K spread over 20 years, but it's not obvious that that's the case.

For me, they owed me $2000 bc I built in closing costs and they overestimated.
 
Joined
Oct 28, 2012
Messages
450
Reaction Score
6,647
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?
 

Doctor Hoop

Prescribing Hardwood Excellence
Joined
Jan 29, 2016
Messages
2,650
Reaction Score
13,851
A question that I haven't been able to find an answer to. I've got 12 yrs. left on a 20 yr at 3.75%, which is not terrible. If I could get 2.5% (or therabouts) on a 10 year I'd take it. I'm told they exist, but not everyone offers them. Anyone know where I could find it? I'm in NH if that matters.
 

Online statistics

Members online
79
Guests online
5,886
Total visitors
5,965

Forum statistics

Threads
161,214
Messages
4,254,927
Members
10,098
Latest member
Hillside


.
Top Bottom