re-fi again?
 

We refinanced our house 2 years ago for a construction project. Fixed 30yrs @ 5%. All the money taken out went into the house. We have a solid equity situation.

We don't need to take out $$$, but wouldn't it make sense to re-fi again and take advantage of these insanely low rates?

The only sticking point? We might want to sell in the next 12 months because of a job related move. At this point, we are planning on keeping the place as a rental, but lets suppose we find some crazy deal on a higher end home, and need to sell to make the down payment. At that point, the only negative is that we haven't had the new loan long enough to offset the cost of the re-fi, yes?

Really, what is the best you can do with your payment? You think more than a hundred bucks? Then I'd go for it.

Down here they advertise no cost re-fi's at 3.5%. I did mine six months ago. I only paid a few hundred to close my old loan. I took the difference $500/month and plow it back into my current 10 year note, to pay it off in 7 years, which was the terms of my old loan. Old note was 4.625%.

I did a refi and when I sat down with a calculator the "payoff" of the refi would start after 13 months.

Look at the cost of the loan and look at your new monthly payments ( and your term payment ) and do th math!

Time to consult the Mortgage Professor's calculator and write up.

When Does Mortgage Refinancing Really Pay?
Mortgage Refinance Calculator: Refinancing One FRM Into Another FRM

I wouldn't refi if there is a chance of selling within 12 months.

George

Run the #'s. If you can save ~1% I bet it works out. If you dont sell right away it makes even more sense.

If I was smart enough to do the math, would I be asking you guys? :D

If you really plan to keep it as a rental, refi it while it is STILL your primary residence. It will be a lot more expensive to refi an investment property.

No math required with the professor's calculator you just plug in your number.

And what Rick said, regarding owner occupied rates.

George

Don't forget about the term. Your monthly payment may go down, but each time you do this you may be adding term. i.e. if you are 5 years into a 30 year mortgage, and you re-fi another 30 year mortgage, you just added 5 years to your payment.

I would suggest when you re-fi, make the term shorter than you currently have left on your mortgage.

Maybe. If you would stay living there, then yes. But to rent it out? Why bother? Believe me, you will have vacancies and repairs to deal with. And a shorter mortgage term will mean higher payments. Those payments really sting when you have no rent coming in. And they count in your debt/income ratios when applying for other loans. I'm assuming there's no issue there for you. But keep it in mind. I don't care about the term of my mortgage on my rental. I know I won't keep it a day longer than I have to. Might as well be a 100 yr. amortization. I'll never live there again and don't care about paying it off.

I subscribe to the idea that cash flow is king. Refi and lower you payment, assuming good rates and fees. If you dont need to the $$ put it on the principal. If you need the cash or have a better place to invest it, you have it.

@Rick, part of our motivation for keeping the place is that we could potentially return to Seattle in the future, and this home would remain a viable residence for us. Very stable neighborhood, and we like the home.

Ok, I'd still opt for the lowest monthly payment you can get. While you're a landlord, that maximizes cash flow. If you move back into the house, you can pay extra each month. One extra P&I payment per year knocks the last seven years off a 30 yr. mortgage. That's 84 payments. The $200 or so extra we pay each month is nothing compared to that eventual savings.

Interesting advice. I'm thinking of a re-fi, as well, though have plans on staying long term in my current house. Contrary to what Hugh quoted (or maybe a clarification depending on the situation), the lower rates I've heard for a jumbo loan are around 4.75%. Obviously a conforming loan would have a lower rate, and that may be the 3.5% he mentions.

Everything I've read, says its not worth it unless it's at least a 1.75 - 2.0% difference in the rate.

Not necessarily true. Just figure out your break-even point and then decide how long after that you'll keep the house. You know the approximate cost to refi. Divide that number by the amount your new payment goes down (adding in the one payment you skip when the loan resets) and that tells you how many months it will take to break even. If you want to sell before then, it's a really bad idea to refi, even if it goes down by five points. Once you break even, every month thereafter is pure gravy. So decide how long you'll keep it after that point. One month? Probably not worth it. Three years? Hell yes.

There are suggestions that the rates will drop to near three with the Treasuries going below 2%

I have a LIBOR ARM on my rental house. It's at 3% now and I should be getting a leter in about a month telling me what it's gonna be for the next year.

2%?