Refinancing options

[utrecht]

Im looking at my options for refinancing my 5 yr ARM which is resetting in about 2 months.

We will be in the house for exactly 7 more years before we retire and move.

Options:

1) Pay off the mortgage. I have the money for this but dont want to do it at this point.

2) Let the mortgage reset and wait until next year to tackle this problem. It appears it will reset to about 5% for this next year which is lower than the going rates but who knows what they will be this time next year.

3) Refinance with my current company (Wells Fargo). Id like comments on any point of this post but this is the option Im interested in hearing thoughts on since Im confused about it. They have a current rate fixed rate of 5.75% for 15 years or 6.25% for 15 years with no closing costs. I know I need to talk to them to see how much closing costs would be for a comparison but Im trying to do some math first.

I owe $102000.

15 yrs at 5.75% gives me a payment of $847
15 yrs at 6.25% gives me a payment of $874

Difference is $27 / month times the 84 months we'll be in the house = $2268

I can compare that $2268 to the closing cost for the lower interest loan but what Im not sure about is how or if I need to compare the loan balances after the 7 years.

Balance for the 5.75% loan after 7 years is $64519
Balance for the 6.25% loan after 7 years is $65407

Do I add the extra $888 that remains on the balance of the 6.25% loan to the extra $2268 in payments to get a total of $3156 in higher costs for the no closing costs loan?

Is the higher balance number of the 6.25% loan even correct or do I need to find out what the payoff would be at that point for both loans?

 

[JohnDoe]

How about a 10yr HE loan fixed at 4.99 with 0 closing cost?

Over 7 years, that would save you about 10k.

 

[brewer12345]

I strongly suggest that you avail yourself of the calculators here: The Mortgage Professor's Website The site is run by a finance professor at Wharton and is above-board.

You know you will be in the house for a precise amount of time. I would give serious though to comparing a 7/1 ARM to a 15 year, 5 year ARM, 10 year Pen Fed HE loan and even a HELOC (Scchwab will do prime minus 1% if you are at 70% LTV and have squeaky clean credit).

 

[Ronnieboy]

My only opinion is that Wells Fargo sucks.

 

[utrecht]

Im looking at the Pen Fed 4.99% HE loan.

I went to the page that tells me how much Im eligible to borrow and what my payments would be. It asks for the current market value of my home which is about $190,000. Then it asks what LTV I want. I select 80% or less.

The next box doesnt say what it is. Then there is a box for the outstanding mortgage amount which is $102,000.

As I said, I dont know what to put in that one box, but if I enter $190,000, it tells me I can only borrow $88,000 which is the $190,000 minus the balance of $102,000 which makes sense but if thats the case, how can I use this HE loan to refinance with? It seems you would have to have at least 50% equity in the house to make it work as a refinance.

I must be doing something wrong, right?

 

[brewer12345]

utrecht, why don't you call them and ask? I have found them to be very helpful and pleasant.

 

[utrecht]

Ahhh..phones...so old school

 

[JohnDoe]

You can borrow up to 400k with LTV of 80% or less.

I just went through the whole process - applied online. It was quite simple. It closed in about 10 days. Too bad I had to rescind.

 

[Htown Harry]

x2 on the Penfed endorsement.

I recently used the PenFed 10 yr. 4.99% HEL to pay off the balance of my 30-yr mortgage. Easy to apply, easy to close and inexpensive...

 

[utrecht]

After weighing all options, Ive also decided to go with the PenFed 10 Yr 4.99% deal. Thanks for the reccmmendations.