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Sorry, another REFI question.......
Old 08-15-2011, 07:06 PM   #1
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Sorry, another REFI question.......

I'm lazy and pretty dumb when it comes to refinancing since I have never done one, so I figured I would run it past y'all and hopefully one of the resident gurus could pitch in with some advice.

I can get a 4.375% 30 fixed loan to replace my 5.10% ARM that can adjust up to as high as 7.5% in 2016.

The fees to do this in this are about $4600 in various charges, the biggest being title insurance. Loan amount is $417,000. Saves about $400 per month from my existing loan, so looks like I would recover the fees in less than a year. Is this a good deal? Credit score is 800, but income is not too good since I'm semi retired and just peddling some used cars on the side for beer money.

I don't know how long I will be in this house-- probably at least until 2018, when the kids are off to college and we may downsize. Or, we may just live here forever. I don't really know, but I don't want to get stuck with a high rate.

Suggestions?

Thanks!
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Old 08-15-2011, 08:38 PM   #2
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Quote:
Originally Posted by cardude
I'm lazy and pretty dumb when it comes to refinancing since I have never done one, so I figured I would run it past y'all and hopefully one of the resident gurus could pitch in with some advice.

I can get a 4.375% 30 fixed loan to replace my 5.10% ARM that can adjust up to as high as 7.5% in 2016.

The fees to do this in this are about $4600 in various charges, the biggest being title insurance. Loan amount is $417,000. Saves about $400 per month from my existing loan, so looks like I would recover the fees in less than a year. Is this a good deal? Credit score is 800, but income is not too good since I'm semi retired and just peddling some used cars on the side for beer money.

I don't know how long I will be in this house-- probably at least until 2018, when the kids are off to college and we may downsize. Or, we may just live here forever. I don't really know, but I don't want to get stuck with a high rate.

Suggestions?

Thanks!
Seems like 5.1% is high for an ARM. I have refinanced a few times, and have been told if you can recoup your upfront costs in a year to 18 months it is worth it to do. You seem to meet those requirements pretty easily. You didn't mention how far down the road years wise you are into your existing ARM. Right or wrong when I refinanced I added more to my payment to make up for the fact I was starting back over at 30 years on the new loan. I have read refi's typically cost around 1% of value of loan, so your about there on that also. Mortgage rates are bouncing around their all-time lows, so it's definitely worth considering.
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Old 08-15-2011, 09:58 PM   #3
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This seems like a no-brainer. The only way that it could be a bad thing is if the adjustable rate goes below the 4.375% rate.
I only see that you're "setting in stone" your monthly housing expense, as opposed to letting it float all over, up to and including almost 2% higher than it currently is.

Congratulations!

Quote:
Originally Posted by cardude View Post
I'm lazy and pretty dumb when it comes to refinancing since I have never done one, so I figured I would run it past y'all and hopefully one of the resident gurus could pitch in with some advice.

I can get a 4.375% 30 fixed loan to replace my 5.10% ARM that can adjust up to as high as 7.5% in 2016.

The fees to do this in this are about $4600 in various charges, the biggest being title insurance. Loan amount is $417,000. Saves about $400 per month from my existing loan, so looks like I would recover the fees in less than a year. Is this a good deal? Credit score is 800, but income is not too good since I'm semi retired and just peddling some used cars on the side for beer money.

I don't know how long I will be in this house-- probably at least until 2018, when the kids are off to college and we may downsize. Or, we may just live here forever. I don't really know, but I don't want to get stuck with a high rate.

Suggestions?

Thanks!
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Old 08-15-2011, 10:20 PM   #4
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After you've found the best rate you can find, call your current mortgage holder and make sure they can't do anything better. Wells Fargo offered me a no cost rate adjustment a few years ago that was a great deal. Since they were keeping the note, there was minimal paperwork, and they paid for the appraisal.
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Old 08-15-2011, 10:37 PM   #5
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Look for a no cost option. Penfed has a 5 yr ARM, 5 year reset lock no cost promo, rate bouncing in the mid-3's now.

If you think you will stay more than 10 years, it'll be better to re-fi into the 30 year fix somewhere with no cost closing.
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Old 08-15-2011, 11:24 PM   #6
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Awright, I got some good writing done today and I'm avoiding my tax returns, so let's crunch numbers.

The NFCU mortgage calculator (https://www.navyfederal.org/calcs/mortgageloan.php) claims that $417K at 4.375% fixed for 30 years will make your P&I payments $2082.02. Your "saving about $400/month fom your existing loan" implies that your monthly P&I payments are currently ~$2482. Does that look right?

$4600 sounds like a big refi fee, although points may be involved. One help might be to ask the title company for a "reissue" of your policy and possibly even the mortgage company's title policy. Or if you've used a title company within the last few years, see if you can use them again for a "serial refinancer" discount. At the very least tell the mortgage company that you want to shop title companies.

Even if you're stuck at $4600, recovering the refi fees in less than a year is a great deal. The cherry on top is going from a more expensive rate, and an ARM no less, to a lower-interest fixed-rate loan. You're not planning to move within the next year so that's fine.

You'd restart the 30-year clock, though. Our Hale Nords mortgage won't be paid off until I'm 80 years old, so you probably don't mind that you'll be carrying one until your late 70s.

You may have trouble qualifying for the loan. Mortgage companies care nothing for assets-- it's all about income. You may need two years of tax returns to justify income, and the mortgage company will pull the IRS copies just to compare your numbers to whatever you told the IRS.

The taxes will be entertaining. If you were amortizing points from a previous mortgage over the life of the loan, then you get to deduct all of those remaining (un-amortized) points after the refi. Of course if you're paying points on this new loan then you have to amortize those over the next 30 years, but you do get to deduct the closing costs.

Are you going to save the difference in monthly payments (and possibly invest it), or are you going to blow it all on longboards & surf wax?
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Old 08-16-2011, 04:48 AM   #7
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It seems like a no brainer to do a refi. The various suggestion given your existing mortgage holder a chance to meet the competition is definitely worthwhile.

If you think you maybe leaving after 2018 than 5/1 or 7/1 ARM may save you since typically there are minimal closing cost with an ARM.

Penfed 30 year fix product has 1+ point and a rate of 4.125.

Also it is probably worth contacting your brokerage, if you have lots of assets but little income to see if they offer any type of mortgage. I ended up using Schwab for my no cost HELCO because they gave income credit equal to 4% of my assets I held with them. Which made it much easier to qualify.
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Old 08-16-2011, 06:28 AM   #8
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Thanks everyone.

I've been in the house about 4 years so I forgot to account for that "restarting the clock" business. I guess it still makes sense though.

Good idea on trying to get a discount on the title insurance. I'll make sure we use Stewart Title again.

And yes, the income is going to be the issue I think. I gave the guy some rough numbers over the phone and he said it looked like my rental interest and dividend income should work, but they still want two years of tax returns so we shall see.

I am working with Schwab Mortgage since Schwab is where I keep most of my assets and I thought that it may be easier to explain to them why I don't have all that much income. My little sideline used car business I finally got up and running last month is going way better than expected (except for the bigger than hoped for time commitment) so there is plenty of income if I include that, but that income has not hit the IRS yet so it's not documented.

Nords-- I just got back from a two week surf trip to CR, but I was a little disappointed with my performance. I had been running and working on my evil paddling machine all year so I was in pretty good shape, but I didn't surf a lick in Texas all year so my timing was terrible and I was pretty kooky the first week. My 14 year old son was able to paddle outside for the first time however so that made it more fun. He wants to practice in Texas this year so he will be more ready when we go back, so we will be making the 2 hour drive to surf our wind slop whenever we can this year. CR waves have ruined my Texas stoke but maybe this new situation will get it back. Still would like to relocate and live next to some consistent surf some day before I get too old to surf, but it has to wait until both kids are in college-- 7 years! :-(
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Old 08-16-2011, 03:03 PM   #9
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... so my timing was terrible and I was pretty kooky the first week.
I hear you...

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My 14 year old son was able to paddle outside for the first time however so that made it more fun.
... but this makes it all worthwhile!

Gotta have shoulder muscles to paddle out with, but I think the only thing that improves surfing is... more surfing.
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Old 08-17-2011, 11:45 AM   #10
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I looked today on Bankrate, and filled out an initial inquiry, and was quoted 3.375% 15 year fixed with 0 points and very low fees. I am asking my bank what they can do, but I will likely be refinancing my mortgage shortly. It's currently at 4.875%, with 12 years, 7 months on it. I'll pay down extra principal with the money I am saving on interest, assuming this all works out.
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