Should I refinance?

[JohnDoe]

Current loan is 30yr(25 left) at 6.5%. I've been paying extra so that it will be done in 2019.

I think I could refinance at 5.5% for 15 years. Make the same pmt I'm paying today and have it finished in 2018 with 10k less interest paid.

Is that enough to pull the trigger on a refinance? I'm not sure what my closing costs would be on a 0 points loan at 5.5%, but I'm looking into it.

JD

[Sandy]

It will likely cost you a good chunk of that 10K in refinance costs. Consider prepaying an additional 1/12th of the loan payment amount (exclude taxes and insurnace) each month. fairly painless and will save interest and shorten time line. Run the numbers here

Paying Down a Mortgage Calculator - Fiscal Agents Financial Tools

[tightasadrum]

Ditto what Sandy said. One caveat: if you don't think you're disciplined enough to keep making that extra payment, look into the 15-year loan, just shop for the lowest cost. But watch it, those guys are tricky, and surprise costs may show up. Find someone you trust through personal experience or a friend whose worked with the business a lot. Do you have any close friends that are in real estate? They're in a whole lot of closings.

[JohnDoe]

I'm currently paying an extra 36% per month to wrap up this 30 yr loan in 12 years.

My pmt is 830 and I'm paying 1130. If I refinance to 5.5%, my pmt required would be 956. If I continue to pay 1130, I would save about 10k and a yr.

If, for some reason, I could only pay the minimum, refinancing would save me about 50k over the life of the loan.

[jIMOh]

Quote:

Originally Posted by JohnDoe Current loan is 30yr(25 left) at 6.5%. I've been paying extra so that it will be done in 2019. I think I could refinance at 5.5% for 15 years. Make the same pmt I'm paying today and have it finished in 2018 with 10k less interest paid. Is that enough to pull the trigger on a refinance? I'm not sure what my closing costs would be on a 0 points loan at 5.5%, but I'm looking into it. JD

If you could get the rate slightly lower, I think it's a good move. If it's same payment and only 1 year shorter, you have less risk in current loan.

[maddythebeagle]

I dont think anybody mentioned this....but how long you are going to stay in the house to actually recoup any closing costs is the biggest key...

[OAG]

Quote:

Originally Posted by JohnDoe Current loan is 30yr(25 left) at 6.5%. I've been paying extra so that it will be done in 2019. I think I could refinance at 5.5% for 15 years. Make the same pmt I'm paying today and have it finished in 2018 with 10k less interest paid. Is that enough to pull the trigger on a refinance? I'm not sure what my closing costs would be on a 0 points loan at 5.5%, but I'm looking into it. JD

Penfed (www.penfed.org) has a 5 year Arm at 5.375% with 0 Closing Costs 0 Points and no prepayment penalty. I know it is an ARM but it is 5.375% for 5 years before any adjustment. Maybe it would get you closer to your target year 2018 a bit cheaper for the next 5 years. Just a thought.

[jIMOh]

Quote:

Originally Posted by maddythebeagle I dont think anybody mentioned this....but how long you are going to stay in the house to actually recoup any closing costs is the biggest key...

Assuming the OP keeps his payment constant, I agree.

Consider that refinancing can have several motives:

1) cash flow. reduce current payments
2) reduce interest rate/ total amount paid
3) lock in payment period

I am sure there are a few less obvious reasons.
1) pull cash out
2) ??

[JohnDoe]

I'm glad I waited. I think I can get a rate below 5% in another month. The bank I was looking at is already down to 5.375%. Closing cost would be 2k which I would just roll back into the loan.

At a rate of 5%, I would be saving close to 20k - including the closing costs.

That's not bad. Heck, maybe I can get 4.75!

[utrecht]

4 1/2 years ago I was in the same boat as you but instead of making extra payments, I was investing the extra money in VFINX.

I was scheduled to have enough in the mutual fund to pay off the house in 5 1/2 years so I refinanced to a 5 year ARM at 3.75%. My payments went down and I would be paying less interest. I was then able to put even more money into the mutual fund and I am now on course to have enough in the mutual fund to pay off the house in about 8 more months (it was 5 months before the market started tanking).

Now I wonder if I should really pay it off or just refinance again to a fixed rate and let the mutual fund continue to grow. Either way, its a win / win situation.

[DJRR]

Quote:

Originally Posted by utrecht Now I wonder if I should really pay it off or just refinance again to a fixed rate and let the mutual fund continue to grow. Either way, its a win / win situation.

If you want to refi fixed I would use the current 4.99% 10 year Pen Fed HEL with $0 closing costs - great deal.

To OP. I am going to do the Pen Fed 5/5 ARM today at 4.75 plus .625 points. What makes this deal smoking hot is they are picking up most of the closing costs and the margin is only 1% + 5 year tbill instead of 2.75%. Caps are 2/5. That is a great incentive, best I have seen on an ARM.

[JohnDoe]

I was looking into some ARMS, but I didn't see where there was much of a rate difference from a fixed.

I could do the 10 yr @ 4.99. That would bump my pmt up $50 from what I am actually paying now. With the 15 yr, it gives me a little flexability with cash flow, should it become a problem.

I think I will sit on the sidelines for a few more weeks, and watch the rates come down, and see who wants my business. (prob no one) lol

[JohnDoe]

Pen Fed down to 5%, 0 points, $1,550 est closing costs.