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A refinancing question
Old 08-24-2010, 07:18 PM   #1
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A refinancing question

I am thinking of a refinance and wanted to run it by the most financially astute group of people I know.

Current Mortgage:

Balance $94,900 @ 5% with 70 months to go
monthly P&I payment = $1565


I am looking at a new 10 year mortgage at 3.75% with zero points.

Assume $2000 closing costs rolled into mortgage
so:

new balance $96,900 @ 3.75%
required monthly P&I = $970
monthly P&I to pay off in 70 mos. = $1543


I will almost certainly stay in the house for the entire term of the loan. I intend to prepay monthly so it is done in the same 70 months. As I see it, I start saving $22 per month immediately. Even more importantly, I gain an option to immediately drop my monthly cash requirements by $573 in an emergency.

Does anyone see any problems with my logic?
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Old 08-24-2010, 09:17 PM   #2
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Quote:
Originally Posted by Gumby View Post
I am thinking of a refinance and wanted to run it by the most financially astute group of people I know.

Current Mortgage:

Balance $94,900 @ 5% with 70 months to go
monthly P&I payment = $1565


I am looking at a new 10 year mortgage at 3.75% with zero points.

Assume $2000 closing costs rolled into mortgage
so:

new balance $96,900 @ 3.75%
required monthly P&I = $970
monthly P&I to pay off in 70 mos. = $1543


I will almost certainly stay in the house for the entire term of the loan. I intend to prepay monthly so it is done in the same 70 months. As I see it, I start saving $22 per month immediately. Even more importantly, I gain an option to immediately drop my monthly cash requirements by $573 in an emergency.

Does anyone see any problems with my logic?
I think this is sound logic.
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Old 08-24-2010, 11:00 PM   #3
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I suggested this over the PenFed thread, but with a Penfed 10 year CDs paying 5%, have you thought about taking a larger loan and sticking it a CD.

The fees associated with $200K mortgage are almost the same as $100K mortgage. You can use the interest earned each month to pay off the principal. If interest rates go up you are in a good position because you can pay an early withdrawal penalty and keep the low interest mortgage.

Something too consider, or not
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Old 08-25-2010, 05:51 AM   #4
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Thanks Clif. That is a good thought.
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Old 08-25-2010, 07:10 AM   #5
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I would seriously look at an ARM in your case, most likely a 5 year hybrid. The costs will likely be lower, the rate may be lower and you would have a far lower minimum scheduled payment in an emergency. You are likely to be able to find a portfolio lender like a traditional thrift or credit untion who can do this inexpensively and who is unlikely to sell the loan. I was in a similar position last year and chose Pen Fed's 5/5 product. IIRC you are in the NYC area, so I would go look at banks like Hudson City Savings. Naturally there are also brokers, etc.
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