About to close on re-fi...but I'm hedging a bit ??

Drdogface · Drdogface's Garage

I started this re-fi process about two months ago. I would go from a 30 yr fixed (with 25 yr left) to a 15 fixed. Present rate is 5.875 and new rate is 4.875 saving me tons of interest but:

Closing costs: $3100...about average I guess.
New loan will cost me $150/month more....is now the time to be holding onto cash? I'm retired and living on investment income..such as it is, plus Soc Sec.
Rates are likely to get even lower....or so rumors are.

Property is worth about $650K and we owe $111K.

What are your thoughts guys...have to mail in the docs by Tuesday. I really thought we might be declined because of low income. Wife only makes about $25K.

I likely will go ahead, but, like I say, I have doubts...

911Rob · 911Rob's Garage

Hey Doc,
I like the 15 year amortization program, much better than the current 25 year.
If you can handle the extra $150/mo then it makes sense to reduce 10 years off the amortization.
I don't like those fees? Current cash vs: long term cash? I suppose they add the fees to the mortgage so you dont have to pay them now? (cash)
I'm also understanding that the interest rate "should be" lower? I just got two spec mortgages at 4% and those are usually higher than the average home mortgage?

If you're feeling hesitant; opt out and weigh out your options a little longer; I'm feeling there's no rush for this sort of thing. Walk away.... tell them you want 4%?

My two CDN cents..... fwiw?
Cheers,

Zeke · 02-14-2009, 11:23 AM

My opinion is.... and I'm not in real estate as Rob is.... that you do what is comfortable. You have tons of equity, you're only managing a 100 G here. The fees seem high given what I've read here lately.

Perhaps you can stall a bit? I'm sure non bank people will be in their office on Monday. Maybe make a couple of calls until you become more convinced this is a deal for you, or less convinced.

People here and people there can do the math for you. I can't. But you can get some comparisons before you sign the docs. BTW, you have pretty much all day Tues, if you need it.

fingpilot · 02-14-2009, 01:29 PM

Thru no stroke of genius, I accidentally did the right thing last September. I got PO'd at a mortgage officer when she 'slipped in' a $2k gotcha at signing. All else was good on the loan, but the thought of $2K gotcha just hit me at the worst possible moment.

We got up and walked out. Let the phone ring for 3 days.

Market crashed a week later and we would have been screwed because we were going to put the proceeds of this cash-back loan into our retirement accounts and let it make 11% while we were gonna pay 5+%. We'd have given our loan proceeds to Wall Street, and had a mortgage with no way to pay it.

We already have been raped by the market tanking, and will soon be standing at the doorway of WallyWorld shoving a shopping cart at the skinheads on their way in.

My $.02? Let it ride, do not do the re-fi. Let the Obama magic flood your dreams at night, and if that doesn't work, I'll give you a reference at WallyWorld.

therotman · 02-14-2009, 09:07 PM

If you are unsure you could always refinance, keep the term at 30 years and have the lender pay all the closing costs.

It is essentially the opposite of paying points to lower your rate. You would get a higher interest rate than 5%, but it should be less than 5.875 and absolutely no cost to you. Keep the term at 30 years but pay extra each month towards principal to attempt to pay it in 15 years.

RoninLB · 02-14-2009, 11:08 PM

I'm going through this now on a jumbo.

In NY there is a 2% state fee for a new mortgage or a refinance. If I go with same lender for the refinance it's considered an "adjustment", or some wording similar, without the state 2% fee.

RANDY P · RANDY P's Garage

Increase your existing payments by $150 and see how long it takes you to pay off the house. If it's less than 15 years if you just up your payments I think you've got your answer...

With a balance that small it probably doesn't make sense to do it- any interest savings you may have gained by lowering rate will probably be wiped out with the extra closing costs added into your new balance. Save yourself $3100 and just increase your payments

rjp

turbo6bar · 02-15-2009, 05:02 AM

According to the mortgage calculator at Mortgage-x, Extra Payment Mortgage Calculator, if you apply the $3100 towards principal AND throw another $150/month in the pot, you would kill the loan in the middle of 2025, or just over 16 years.

Personally, I'd hold onto the money unless you have a sizable reserve account in place. If you already have cash reserves, then throw some funds at a refi or extra principal.

jorian · 02-15-2009, 08:01 AM

Wait. Rates are still heading south. 2.79% in fees is brutal.

RANDY P · RANDY P's Garage

Quote:

Originally Posted by turbo6bar

According to the mortgage calculator at Mortgage-x, Extra Payment Mortgage Calculator, if you apply the $3100 towards principal AND throw another $150/month in the pot, you would kill the loan in the middle of 2025, or just over 16 years.

Personally, I'd hold onto the money unless you have a sizable reserve account in place. If you already have cash reserves, then throw some funds at a refi or extra principal.

Also, if he throws in the skipped payment as well (if he refi'd he'd get to skip a month) he'd probably be right at the 15 year mark.

It also shows one more thing - he'd had to wait a long time to recoup the cost, if he sold early he'd probably lose.

rjp

72doug2,2S · 72doug2,2S's Garage

We're going through this now too (conforming). Same lender 1% point lower, we will finance all except the application fee and breakeven in 4.5 years keeping a fixed 30 yr. If we sell and move we are screwed, but if we sell and move it will hopefully be for a larger salary.

But, if I stay and use my entire term I save $43,000.