mortgage re-fi questions

scottsins

scottsins

1,000+ Posts
My bank wants to re-finance my home loans at a much lower rate. I am concerned about the term of repayment being longer and negating savings. I DO know that i can just agree to a 30 year term and pay extra anyway, but I would like to not have to worry about doing that to reap benefits.

I have a home I purchased 2 years ago. We have two loans. the 80% loan is at 6.5 or so. the smaller loan is fixed at 9.125. Of course, the smaller loan is for a term of 15 years.

they want to re-fi in to a 25 year term or something. the new offered rate (if I do NOT escrow taxes and insurance) is 5.75.

this should work out right? even though the payment term is being extended 12 years on the smaller loan, the rate is way better.

Additionally, if I did escrow (no PMI, just taxes and homeowner's) I could get the rate down to 5.5% and my loan advisor tells me it is common to have this removed by request after one year of good payment history or whatever. I KNOW that i lose out on $ by escrowing this stuff at no return from the bank. however, since that is the amount i should be stashing away anyhow, would it make sense to add that on to the payments every month, to get the fixed rate reduced the additional .25%.

If this question is stupid or incomplete, just let me know.

Should I look to the total principal reduction i get with my payments currently, and just compare that to the amortized prin. reduction stated for the beginning of the proposed refinance numbers? I would think that would guide me to the answer, but I am unsure.
 
tough without more info but your thinking on the right track. Each scenario is different. Some may need the cash flow of a lower payment. If not, if might not make sense to lose the benefit you have re: principal reduction.

I am quoting rates lower than that and the cost of escrowing yourself should be nowhere near 0.25% in rate. You should ask about that. Rates are very good right now.

if you have any other questions or want more specific info, shoot me an email

[email protected]


good luck

hookem.gif
 
How long you planning on staying in the house?

Oh, by the way, whatever Ninerhorn is quoting i'll beat it by $10
wink.gif
 
it looks like we will be reducing principal about $20 month with this re-fi, with the payments being $100 less/month.

* These figures come from the non-escrowed rate/payment amounts.

If you two gentlemen could just PM me your contact info, I may give you a shout tomorrow.
 
not knowing the numbers I guessed it would be more as far as the payment.

When you say, reducing principal 20 per month. Do you mean an additional $20 to what you currently pay or just $20 total per month?

tough to know without the number's. That said, you can get a better rate than what they gave you.


hookem.gif
 
I meant that the $ being applied to principal every month would be $20 more than what currently allocates in that direction.
 
I'm not in the mortgage business but the two times that I've had escrow the bank has done some amazing things to **** it up. I will never have escrow again regardles of any potential savings. It's simply not worth the hassle when the bank screws it up at some point.
 
the answer depends on.... closing costs and how long you plan on being in this home.

However assuming the closing costs are minimal (and you can close to deduct this year) then why not refi? Keep allocating the same amount of cash each month and simply pay down your principal by the $100/ month.

If you were trying to do a math formula I would simply take the closing costs and divide by $120 to figure out the number of months to your "break even" point given your current payment. IF you continued to make the extra $100 to principal every month you might be surprised when your payoff date might be.

I ran the numbers (without closing costs) and put in 200K at 5.75% on a 25 year loan with an additional $100 to principal as is your current amount of outflow per month. The payoff date is 21.25 years. Here is a calculator for the principal reduction The Link
 
Summer,

So what is the benefit of refi over just paying more principal to get your repayment period to match the refi term? Why would anyone refi? Do you end up paying less interest over that same term (say 15 years)?
 
the lower your interest rate, the less interest that accrues each month and the less you pay. so if you budget $1500 for mortgage payment and your current payment is 1350 then you are putting 150 towards principal. if you refi to a payment of 1250 then you are now putting 250 towards the principal, or you could adjust your payment to 1400, put the same 150 towards principal, and keep the extra 100.

niner, if you plan on being in the home for many years, then a refi may be the right thing for you with the difference in rate that you can get right now. factor in how much the closing costs are out of pocket for you and how long the lower payment will take to recoup the closing cost investment. because whether you bring the CC to the table or roll them into your new loan, you pay for them eventually when you sell.
 
Unbiased- whther or not to Refi depends on basically 3 factors. 1) costing cost break even point 2) how long you expect to be in the home 3) savings per month in interest that could be applied to principal.

If your closing costs are high and you might be transfered in 2 years, refi might not be the best deal. In Scottsins case the second with the considrably higher rate helps skew towards the overall refi. assuming long term occupancy of the home.

Think of it this way- out take out a 30 year note. The very first month you pay an extra 100 dollars in principal. Let's assume that $100 woudl have been the last 100 dollars on the note. Let's also assume a 6% simple interest rate. By paying that $100 the first month you do not have to pay $100 (.06 x 30). Or roughly $180 in interest on that $100 over 30 years.
 
You must log in or register to reply here.

Weekly Prediction Contest

* Predict HORNS-AGGIES *
Sat, Nov 30 • 6:30 PM on ABC

Recent Threads

Prediction Results Threads

2024 Schedules

Back
Top