Someone talk me down from a Refi - Mothering Forums

Forum Jump: 
 
Thread Tools
#1 of 25 Old 11-18-2010, 01:07 PM - Thread Starter
 
AndtheStars's Avatar
 
Join Date: Mar 2009
Location: Penn's Wood
Posts: 636
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

Here's the backstory:

 

DH and I moved in June.  Sold our house, bought a new house and currently have about $60,000 equity in the new house.  30 yr fixed rate mortgage at 5%.  Payment per month equals about one paycheck.  We both work and our paychecks (bi weekly, so 4 checks) are about the same amount because of health care and retirement deductions from DH's check.  We have more cc debt than I want to publically admit but we're working on paying it off and should have it paid off in about 12 months.  We have an emergency fund. 

 

I opened the paper today and for the first time realized how ridiculously low refi rates really are.  I know that we have a good rate on our current mortgage but I did the refi calculator thing and if we do a 15 year refi, our payments will increase by $250 a month which I think we could swing with some really tight budgeting and we save $84,000 in interest.  If we do a 20 year refi, payment will only go up about $100 which we can definately swing with tighter budgeting.  I know it sounds crazy to refi 6 months after you get a loan but I'm so in love with the thought of taking 10 to 15 years off the mortgage in one swoop.  The costs of the refi are only about one month's payment and I'm thinking that since we had all the reports/appraisal/credit checks etc. done 6 months ago, they might still be applicable.  Please tell me I'm nuts so I can stop thinking about not paying $84,000 in interest and being able to have the house paid off before DS gets to college.      


Maria blahblah.gif, wife to A malesling.GIF, mama to DS M 8/09 2whistle.gif and DS L 6/12 biggrinbounce.gif

 

Everything will be ok in the end.  If it's not ok, then it's not the end - Paolo Coelho  

AndtheStars is online now  
#2 of 25 Old 11-18-2010, 01:33 PM
 
diana_of_the_dunes's Avatar
 
Join Date: Dec 2008
Location: Northern Indiana
Posts: 1,680
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

Well...  Unless your closing costs would be extremely high for some reason, I think it's probably a good idea.  I know, not quite what you were asking for...  bag.gif   But considering how much money you would save, and you almost certainly wouldn't need a new appraisal (here they're good for 3 years), I can't really think of any reason not to.   They will run a new credit check, so if the new payment would result in an unfavorable debt-to-income ratio, you might have problems.  But if that's all good...  I say go for it.


Married to my loving hubby, proud mama to Ethan thumbsuck.gif (9/09) and Rowyn (7/12)slinggirl.gif  and aspiring homesteader chicken3.gif

Missing my twins, Owen and Sophia, born too soon, July 2011 angel2.gifangel3.gif

diana_of_the_dunes is offline  
#3 of 25 Old 11-18-2010, 01:46 PM
 
painefaria's Avatar
 
Join Date: Jul 2007
Location: On the road again
Posts: 1,191
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

I would look at the snowball caculator first before comitting to a larger payment.  My fear in this market that overextending yourself might be a bad idea.  You can always increase the payment on the mortgage that you have adding the amount that you have on hand, which will do the same thing, but you have the flexability to pay a mortgage amount that you can comfortably pay right now.  You don't want to lock youselves into something that you may not be able to do if something big comes up.


S & Yrainbow1284.gif (Vermont Civil Union 7/8/03) DS1 Holdennovaxnocirc.gif (4/25/07) and two in heaven  angel.gif1/10 &  angel.gif5/10 our rainbow1284.gif is here  DS2 Keegan(5/23/11)homebirth.jpg
 
 
 
  

painefaria is offline  
#4 of 25 Old 11-18-2010, 01:48 PM
 
laohaire's Avatar
 
Join Date: Nov 2005
Posts: 7,314
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

I might have missed something but - why not just make those extra payments without refi-ing? Pay it off in 15 or 20 years, don't pay the fees for the refi.

 

I am all for paying off a mortgage as quickly as possible, but if you keep the 30 year mortgage you have the advantage of a little more leeway if you come on hard times. You CAN pay an extra $100 or $250 a month if you choose. But if you have a big bill or a job loss, you're not on the hook for it.

 

Without more information, I would definitely keep what you've got and simply increase your payments.


Homeschooling mama to 6 year old DD.

laohaire is offline  
#5 of 25 Old 11-18-2010, 03:13 PM
 
Carson's Avatar
 
Join Date: May 2005
Location: Chicago
Posts: 856
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

I'm not going to talk you down, but suggest a combo of what ppl above are suggesting. It's also what I am doing and therefore the best advice.  ;)   (kidding)

 

I would explore refi with your current lender to see what kind of interest rate you could get on a 30 year loan, and then use a principal payment calculator to determine what happens if you just make additional principal payments.  You can't get the lower rate without refinancing, I don't think.

 

We could swing a refi under 15 year loan, but want to be protected in case I take early retirement with the next baby.  I don't feel comfortable committing to the 15 year loan for reasons others posted.


Carson, living life with my 3 boys: DH, DS Dec '09 blahblah.gif  and newbie DS Sept'12baby.gif

always two in my heartbeat.gif 

 

 

Carson is offline  
#6 of 25 Old 11-18-2010, 10:39 PM
 
heatherdeg's Avatar
 
Join Date: Dec 2003
Location: Everywhere... thanks, technology!
Posts: 4,888
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 5 Post(s)


Quote:
Originally Posted by laohaire View Post

I might have missed something but - why not just make those extra payments without refi-ing? Pay it off in 15 or 20 years, don't pay the fees for the refi.

 

I am all for paying off a mortgage as quickly as possible, but if you keep the 30 year mortgage you have the advantage of a little more leeway if you come on hard times. You CAN pay an extra $100 or $250 a month if you choose. But if you have a big bill or a job loss, you're not on the hook for it.

 

Without more information, I would definitely keep what you've got and simply increase your payments.

 

 

:yeah  THIS! THIS! THIS!  And I say this having been in the position of buying a house that was WELL below our means on a 30yr mortgage just 8 months before losing 2/3 of our income.  NOBODY saw THAT coming--I can assure you!

 

Although you won't save the exact same amount if you just make the extra payments, it's darned close.  Certainly close enough that it's not worth the risk of pulling the 15 or 20 yr mortgage commitment.  

 

This is a good calculator for seeing how the different payments affect your overall interest:  http://www.drcalculator.com/mortgage/

 


Heather - Wife , Mommy  & Health & Wellness Educator, Speaker & Consultant 
 
Dairy, soy & corn free with limited gluten... yes, really. And journeying towards peace.  Blogging about both.
 
Let me guide you to find the food and lifestyle choices...
heatherdeg is offline  
#7 of 25 Old 11-19-2010, 12:37 AM
 
sunnysandiegan's Avatar
 
Join Date: Mar 2008
Posts: 4,407
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

I concur with laohaire and heatherdeg.

 

I'm not sure what rates you are looking at, but what I've seen lately is barely half a point below your current mortgage rate. Definitely not worth the fees nor the higher monthly commitment when you still have other debt to pay off. It is very likely you haven't even broke even on the fees you paid for your first mortgage. Adding to them is really increasing the total cost of your mortgage. Unless you go with the same lender, you'll still have most of the same expenses all over again (except the appraisal possibly).

 

You can totally achieve the same basic effect by paying extra to principal on your own without refinancing to a shorter term. Just check your mortgage terms to be sure you don't have any prepayment penalties and to see how your lender applies payments. Your current rate and the new rate are just not that much different. The money savings comes from the higher payments due to the shorter time frame.

 

Meanwhile, I would recommend NOT paying more towards the mortgage until you have other higher cost debt paid off first. Pay off the smallest debt or highest rate debt first. There are proponents of both ways: one is a psychological boost which can often spur on faster debt repayment (and it frees up some monthly cash faster for more debt repayment) and the other is financially savvy but can sometimes take too long to reap the "good feelings" and visual rewards and people lose momentum. Take this time to get a firm handle on your finances and work hard to ditch the consumer debt noose. Then, you can focus on the mortgage.


"Kind words can be short and easy to speak, but their echoes are truly endless." - Mother Teresa

sunnysandiegan is offline  
#8 of 25 Old 11-19-2010, 06:28 AM
 
Mulvah's Avatar
 
Join Date: Aug 2008
Posts: 1,971
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 1 Post(s)

I would find a good mortgage calculator, compare the loans, determine the actual costs of the refinance, and the actual (well, near actual) cost of your new payment.  As someone else suggested, I would check with the bank that owns your loan to see what rates you could get and also check with other local mortgage companies to see what rates you could get.

 

I can tell you what I did - I refinanced to a 20-year mortgage.  I desired a 15-year mortgage, but with the economy and the unknowns, I felt it was best to go with the middle ground.  It has worked out really well for us.  We pay $20-30 more each month and I am still able to pay extra on the mortgage each month.  Even if that won't be the case for you, I don't think $100 more is a lot to ask to cut ten years off the life of your loan.  Now, if you can't do it, you can't do it.  But, it sounds like you can, especially since you are able to pay off your debt in 12 months and have an ER fund.  All that said, I take risks with money, so my opinion is based on what I did do and would do with my personality.  smile.gif
 

Quote:
Originally Posted by laohaire View Post

I might have missed something but - why not just make those extra payments without refi-ing? Pay it off in 15 or 20 years, don't pay the fees for the refi....

 

This doesn't exactly equal the same thing and it will highly depend on the actual numbers. 

Mulvah is offline  
#9 of 25 Old 11-19-2010, 07:02 AM
 
heatherdeg's Avatar
 
Join Date: Dec 2003
Location: Everywhere... thanks, technology!
Posts: 4,888
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 5 Post(s)


Quote:
Originally Posted by Mulvah View Post

Originally Posted by laohaire View Post

I might have missed something but - why not just make those extra payments without refi-ing? Pay it off in 15 or 20 years, don't pay the fees for the refi....

 

This doesn't exactly equal the same thing and it will highly depend on the actual numbers. 



You know, I knew it didn't equal exactly the same (although it is close) BUT when you factor in the costs to close on the refi, it may be the same if the rates are close.


Heather - Wife , Mommy  & Health & Wellness Educator, Speaker & Consultant 
 
Dairy, soy & corn free with limited gluten... yes, really. And journeying towards peace.  Blogging about both.
 
Let me guide you to find the food and lifestyle choices...
heatherdeg is offline  
#10 of 25 Old 11-19-2010, 09:52 PM
 
Poddi's Avatar
 
Join Date: Feb 2003
Location: BC, Canada
Posts: 1,927
Mentioned: 1 Post(s)
Tagged: 0 Thread(s)
Quoted: 1 Post(s)

Is it likely that either of you might lose your job?  Because if one of you do, then your mortgage will suddenly become more than 50% of your take home pay, which will be very difficult to manage.  I personally would not try to make it higher.  I agree with the additional payment thing.  You can simply arrange to increase your monthly payment by a certain amount (my bank allow up to 100%) without refinancing.  That's what we did with ours.  BTW our mortgage is 5.5%, so not exactly low.  But after calculating the penalty we found it's not worth it to refinance.  We'd just pay it off sooner to save money.


Mom to 2 beautiful autistic boys (12 & 11)  
Poddi is offline  
#11 of 25 Old 11-20-2010, 05:07 AM
 
Join Date: Jan 2004
Posts: 4,722
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

We did a refi in the summer and I would not recommend it.They charged for every little thing(mortgage survey,apprasial,checking this and that) no slack at all by using previous info. The closing costs were higher than what they estimated. I would pay extra on the principal instead of doing a refi. We dislike our current lender and plan to pay our 15 mortgage off in 10 or less.

mattemma04 is offline  
#12 of 25 Old 11-20-2010, 05:48 AM
 
mirlee's Avatar
 
Join Date: Jul 2002
Location: next to the snoring bear
Posts: 3,266
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

We have refinanced twice.  Our rate is now way below 5%. We are at 4 1/8th.  I would suggest shopping around with the lenders.  If you have a good Fico score, you might be able to get a darned good rate. We did our refi with NO closing costs or appraisal fee.  My boss refinanced his house about three months after he moved into it and has done it twice since.  Weigh your options, look at the what the offers are,  and talk to the lenders.  

mirlee is offline  
#13 of 25 Old 11-20-2010, 05:57 AM
 
ChristyMarie's Avatar
 
Join Date: May 2006
Location: Illinois
Posts: 2,255
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

We refinanced this house about 5 months after we bought it.  There was a huge drop in rates.  There was a small fee but the lower rate more than made up for it.

 

Look at all the calculators - run the numbers - and consider refinancing at 30 years and paying extra when you can instead of locking into a larger payment.  You can always pay extra to get it paid off sooner - but if you lock into a higher payment and something comes up, it isn't possible to pay less, ya know?

ChristyMarie is offline  
#14 of 25 Old 11-20-2010, 09:49 AM
 
3 little birds's Avatar
 
Join Date: Nov 2001
Posts: 1,002
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

Wow, refi costs in your state must be low.  I used to be a mortgage broker and in my state they were never under 5K.  IME, even if they say there are no costs, the costs have been worked into the rate (meaning you would pay a lower rate if you paid the costs up front).  If it were me, I would probably pay my current mortgage as if it were a 10 or 15 year mortgage so I could avoid the costs and hassle of a refi, and have my 30 year mortgage to fall back on in case of an emergency.


wave.gif
3 little birds is offline  
#15 of 25 Old 11-20-2010, 07:00 PM
 
Poddi's Avatar
 
Join Date: Feb 2003
Location: BC, Canada
Posts: 1,927
Mentioned: 1 Post(s)
Tagged: 0 Thread(s)
Quoted: 1 Post(s)

Maybe banks in US have better refinancing policy?  Our penalty would have been 8 - 10 k, because they were based on "interest difference" for the rest of our mortgage, so the lower the current interest is the more the penalty is.  Plus they use standard book interest for the original interest, not the 5.5% we got which was a "special", so the difference would be even bigger.  This apparently is a common practice in banks here to guarantee they'd get their interest no matter what.  As far as I know almost nobody bother to pay the penalty and refinance here.  But then most mortgage terms are only 5 years in Canada, so they're not locked down for long. 


Mom to 2 beautiful autistic boys (12 & 11)  
Poddi is offline  
#16 of 25 Old 11-22-2010, 08:43 AM
 
cschick's Avatar
 
Join Date: Aug 2007
Posts: 919
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

Run the numbers with you paying already paying the extra a month.

 

We're one year into a 20 year mortgage at 5%, and pay an extra $300 a month to principal. While we could currently refinance into a 15 year at say, 3.5%, and have the "same" payment (our current payment + the $300 extra we put in per month) it doesn't gain us anything at all and loses us flexibility. With our current repayment schedule and our extra to principal, we are on track to pay off our mortgage in just over 15 years. But if we desperately need to at some point, we can pull back from paying that extra $300/month . . . while if we refinanced, we'd be locked into having to pay it.

cschick is offline  
#17 of 25 Old 11-22-2010, 10:24 AM - Thread Starter
 
AndtheStars's Avatar
 
Join Date: Mar 2009
Location: Penn's Wood
Posts: 636
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

Thanks so much for the replies!  Heatherdeg...that's an awesome mortgage calculator.  I totally see the wisdom in just keeping our mortgage the way it is now and adding on extra payments in case something happened.  It's just seeing that huge savings in interest number and taking off 10-15 years of the mortgage in one fell swoop that is so tantilizing to me.  I also tend to be a little cavalier with money so the risk is part of the reward for me.  I have a call into my lender, whose a local bank, to see what they could do for me.  I definately am a little less enthusiastic than I was when I posted.  I'll keep updating. 


Maria blahblah.gif, wife to A malesling.GIF, mama to DS M 8/09 2whistle.gif and DS L 6/12 biggrinbounce.gif

 

Everything will be ok in the end.  If it's not ok, then it's not the end - Paolo Coelho  

AndtheStars is online now  
#18 of 25 Old 11-22-2010, 10:29 AM
 
AllyRae's Avatar
 
Join Date: Dec 2003
Location: Ohio
Posts: 6,391
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)



We built a house and moved into it in March of this year, but we are in the process of refinancing right now because rates went really really low.  Closing costs are being rolled into the loan (and aren't that much anyhow) and it would save a ton on interest.  I'd definitely encourage you to do it if you can...there's no reason to pay extra on a loan if you don't have to, even if you just got the loan.

Quote:
Originally Posted by diana_of_the_dunes View Post

Well...  Unless your closing costs would be extremely high for some reason, I think it's probably a good idea.  I know, not quite what you were asking for...  bag.gif   But considering how much money you would save, and you almost certainly wouldn't need a new appraisal (here they're good for 3 years), I can't really think of any reason not to.   They will run a new credit check, so if the new payment would result in an unfavorable debt-to-income ratio, you might have problems.  But if that's all good...  I say go for it.


We needed an appraisal to do our refi, and we only have lived here since March.  But even that wasn't that expensive.
 


~Brandon Michael (11/23/03), Jocelyn Lily Nữ (2/4/07, adopted 5/28/07 from Vietnam), Amelia Rylie (1/14/09), & Ryland Josef William (9/7/05-9/7/05 @ 41 wks). 
AllyRae is offline  
#19 of 25 Old 11-22-2010, 11:34 AM
 
sunflower.mama's Avatar
 
Join Date: Apr 2008
Location: Boston suburbs
Posts: 696
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

We always do no closing cost loans.  Yes the interest rate is a bit higher to take the closing costs into account, but you're then able to refi as many times as you want without any financial penalty.  So if the interest rate has dropped on a 30 year fixed, I'd do a no closing costs loan on the 30 year, and then pay extra to principle.  That way you get the lower interest rate, quicker payoff, and no additional committment.

 

And yes Poddi - mortgages here in the US are different.  Prepayment penalties such as you are describing are rare. 



Quote:
Originally Posted by 3 little birds View Post

Wow, refi costs in your state must be low.  I used to be a mortgage broker and in my state they were never under 5K.  IME, even if they say there are no costs, the costs have been worked into the rate (meaning you would pay a lower rate if you paid the costs up front).  If it were me, I would probably pay my current mortgage as if it were a 10 or 15 year mortgage so I could avoid the costs and hassle of a refi, and have my 30 year mortgage to fall back on in case of an emergency.




Katherine mother to DS 8/03 and DD1 9/06 and DD2 6/10
sunflower.mama is offline  
#20 of 25 Old 11-22-2010, 04:19 PM
 
shoes's Avatar
 
Join Date: Oct 2006
Location: Euless Texas
Posts: 383
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

where do I find a no closing cost refi?  Any major banks out there that regularly do them?

shoes is offline  
#21 of 25 Old 11-23-2010, 11:01 AM
 
Ygle's Avatar
 
Join Date: Mar 2007
Posts: 606
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

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). 

Ygle is offline  
#22 of 25 Old 11-23-2010, 11:10 AM
 
Mrs-Mama's Avatar
 
Join Date: Jul 2007
Location: Newport News, VA
Posts: 2,598
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

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!


Wife to J, SAHM to W (03/06) ribboncesarean.gif at 32w4d, C (10/08) ribboncesarean.gif, and H (02/11) ribboncesarean.gif

Mrs-Mama is offline  
#23 of 25 Old 11-23-2010, 04:15 PM
 
heatherdeg's Avatar
 
Join Date: Dec 2003
Location: Everywhere... thanks, technology!
Posts: 4,888
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 5 Post(s)


Quote:
Originally Posted by Ygle View Post

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.

 



Quote:
Originally Posted by Mrs-Mama View Post

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!


Heather - Wife , Mommy  & Health & Wellness Educator, Speaker & Consultant 
 
Dairy, soy & corn free with limited gluten... yes, really. And journeying towards peace.  Blogging about both.
 
Let me guide you to find the food and lifestyle choices...
heatherdeg is offline  
#24 of 25 Old 11-24-2010, 06:47 AM
 
nd_deadhead's Avatar
 
Join Date: Sep 2005
Posts: 2,149
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 4 Post(s)

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!


If the chips are down, the buffalo is empty.

nd_deadhead is offline  
#25 of 25 Old 11-24-2010, 07:19 AM
 
laohaire's Avatar
 
Join Date: Nov 2005
Posts: 7,314
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)

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!


Homeschooling mama to 6 year old DD.

laohaire is offline  
Reply

Quick Reply
Message:
Drag and Drop File Upload
Drag files here to attach!
Upload Progress: 0
Options

Register Now

In order to be able to post messages on the Mothering Forums forums, you must first register.
Please enter your desired user name, your email address and other required details in the form below.
User Name:
If you do not want to register, fill this field only and the name will be used as user name for your post.
Password
Please enter a password for your user account. Note that passwords are case-sensitive.
Password:
Confirm Password:
Email Address
Please enter a valid email address for yourself.
Email Address:

Log-in

Human Verification

In order to verify that you are a human and not a spam bot, please enter the answer into the following box below based on the instructions contained in the graphic.



User Tag List

Thread Tools
Show Printable Version Show Printable Version
Email this Page Email this Page


Forum Jump: 

Posting Rules  
You may post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are Off