Someone talk me down from a Refi - Page 2

[Ygle]

You know, I don't think any banks do no cost refis...???  I think you would need to check with a broker or a mortgage company.  Unless you have a mortgage through Wells Fargo, right now they have a program where you can refinance without any cost... including no title transfer fees, absolutely nothing, which is what we just did.  We were paying 4.375 and went to 3.875 (couldn't get lower because we don't owe enough, I found that odd talking to various brokers that in order to get the best rate we had to owe more) so just the cost of an appraisal (and according to everyone I talked to you can't get a loan at all without an appraisal, even if you just had one a few months ago, but maybe that is just in my area since home values have dropped so much?) and title transfer fees and paper moving costs would've had us just breaking even over the life of the loan so if there were any costs involved it wouldn't have made sense for us... and that's even without any points or origination fees or other lender fees involved. 

I don't think it makes any sense to get a 20yr loan... again, maybe this varies in other areas? but I know ime 20yr loans pay the same rate as a 30yr loan (and 10yr is the same as 15yr) so it makes more sense to get a 30yr loan and then amortize your payments as if you had a 20yr loan... it would be exactly the same as a 20yr loan only with the option to pay less if you ever need to.  This was something I looked into with getting a 10yr loan but when I found out the rates weren't any better than a 15yr loan we decided to just make higher payments on a 15yr.  I have to admit, it is tempting to pay less if you have that option though!  But if you can get all the costs and a set rate and then find that the difference in payments times 360 (for a 30yr loan) is more than the cost plus 6 (or however many payments you've already made) times the new payment, it might make sense (depending on how big the difference) just to do that and start paying 250 more each month... with a lower rate you will be paying that down even faster, so it seems like a good idea to me (and if the costs really are only one month's payment than you can just pay that right up front since you will be skipping a month's payment when you get the new loan so your balance won't be negatively effected either). 

[Mrs-Mama]

Another thought...

We are in the process of refinancing (another 30 year, but we wanted to take money out to add-on).  Anyway, we had been in the habit of paying down our principle by making what ended up being an extra mortgage payment a year (divided up over 12 months, though).  With such a low mortgage interest rate, though, (we will now be at 4.25%), we realized that this is not the best idea.  A) As others have mentioned, liquid cash is there if you need it, in case someone loses a job, medical hardship, etc.  You can't just take money out of the house...sometimes refinancing and/or home equity loans are not options.  B) We have found that by putting the same amount per month in a savings account (even a regular savings acct!), over 30 years we will have made more money on interest than we would save in mortgage interest by pre-paying!  Crazy!  Do the calculations yourself to be sure.  Invest it and you should be able to make even more!  C) Since we itemize our deductions, we may as well take advantage of the mortgage interest deduction for as long as we can.

Good luck with your decision!

[heatherdeg]

Originally Posted by Ygle 

You know, I don't think any banks do no cost refis...???  I think you would need to check with a broker or a mortgage company.  Unless you have a mortgage through Wells Fargo, right now they have a program where you can refinance without any cost... including no title transfer fees, absolutely nothing, which is what we just did.  We were paying 4.375 and went to 3.875 (couldn't get lower because we don't owe enough, I found that odd talking to various brokers that in order to get the best rate we had to owe more) so just the cost of an appraisal (and according to everyone I talked to you can't get a loan at all without an appraisal, even if you just had one a few months ago, but maybe that is just in my area since home values have dropped so much?) and title transfer fees and paper moving costs would've had us just breaking even over the life of the loan so if there were any costs involved it wouldn't have made sense for us... and that's even without any points or origination fees or other lender fees involved. 

Two things:  First, many banks do what's called a "streamline refinance" of a mortgage for an existing mortgage customer. Whenever someone's looking to refinance (even back when times weren't so horrible), I always told them to check with their existing lender first because it may not cost them anything.  But second, the lending guidelines have changed when it comes to appraisals--to the extreme where we are currently buying a foreclosure and financing it with the same (very large, national) bank that owns the property.  The foreclosure division couldn't let us use their appraisal even if they wanted to.  I can't recall the exact reasoning/rule around this, but when they explained it to me, it made sense.  Overkill, but sense.

Originally Posted by Mrs-Mama 

Another thought...

We are in the process of refinancing (another 30 year, but we wanted to take money out to add-on).  Anyway, we had been in the habit of paying down our principle by making what ended up being an extra mortgage payment a year (divided up over 12 months, though).  With such a low mortgage interest rate, though, (we will now be at 4.25%), we realized that this is not the best idea.  A) As others have mentioned, liquid cash is there if you need it, in case someone loses a job, medical hardship, etc.  You can't just take money out of the house...sometimes refinancing and/or home equity loans are not options.  B) We have found that by putting the same amount per month in a savings account (even a regular savings acct!), over 30 years we will have made more money on interest than we would save in mortgage interest by pre-paying!  Crazy!  Do the calculations yourself to be sure.  Invest it and you should be able to make even more!  C) Since we itemize our deductions, we may as well take advantage of the mortgage interest deduction for as long as we can.

Good luck with your decision!

In regards to the boldface--YES!  When we were younger, we thought "Oh, well, we can always refinance into a 30yr if need be."  Of course, when "need be" is that one of you lost your job--qualifying for that mortgage isn't possible!

[nd_deadhead]

Dicksonley, unless the interest rate is a lot less (a difference of more than 1 percentage point), it probably wouldn't make sense to refinance. Making extra payments now (early in the mortgage) will save you a LOT of interest over the life of the loan, and cut years off your payments.

I assume your credit card debt is at a higher interest rate than your mortgage. The very best thing you can do for yourself is pay those down as quickly as you possibly can! As soon as those are paid off, add the amount you were paying toward credit cards to your existing mortgage payment.

I have refinanced myself (we've been in our house 20 years), and there can be advantages to it, but it does cost thousands of dollars every time. If you roll the closing costs into the mortgage, you're paying interest on that amount for 15 years too - not a good idea. For example, if you added $3000 to a 4.5% loan, you would pay $1131 in interest over 15 years. It's only $6/month on the monthly mortgage payment, but it adds up over time.

Good luck!

[laohaire]

It IS unbelievable what a small amount of extra principal payment will do. I just this week crunched the numbers and found that a measly $21 extra on my payment will cut 2 years off the loan, which is cool, but the part that made my jaw drop was the fact that I'd also save $8,200 in interest. Hello! This is actually something I've known for years but we were always putting our extra money into other debt or into our meager savings. I am totally committed to sending at least $21 extra on the mortgage from now on. I REALLY would like to save $8,200!