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2011-08-19 10:06 AM

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Master
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Subject: Is it time to Refi the mortgage

With the market in turmoil somehow the interest rates continue to go lower.  Was looking at a refi now that rates are sub 4%.  Here are the particulars, let me know WWCOJD.

We currently have about 28.5 years left on a 30yr @ 5%

Offer is for refi the balance ($528K) at 3.875% for 30yr. Savings of $410/mo over current mortgage and around $90K in total interest over the term.

 

Total fees are 1% orig fee and .625 disc points, aprox $8500.  Bank (Navy Federal Credit Union) offering $2500 credit so out of pocket is about $6K.

We plan on staying here for 5-10yrs.

 

So is it worth it.  Well, it seems obvious I guess that its worth it.  Really what I want to know is what else should I be factoring in here?  Also, is it possible to play the bank against another bank to get better rate and/or better fees?

 

This is whats called a "Streamline VA refi".



2011-08-19 10:21 AM
in reply to: #3650491

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Runner
Subject: RE: Is it time to Refi the mortgage
How much are you able to put down on the refi? If you're not able to do 10-20% (I forget the exact amount), chances are you're going to end up with PMI in there, and that will be for most likely 5 years.

The fact that you are only about 2 years into the mortgage means that you don't have a lot of it paid down, so the down payment is going to be hefty. Of course, PMI isn't horrible, but it's an added cost that may or may not be factored in (you'd have to ask or look at the documentation if you don't already know).

If you do decide to refi, and are pretty definite that you will be selling this house in the next 5-10 years, I would take that monthly savings and put it into a separate bank account that you can use as a down payment on your next property.

I am not a loan expert, but I have gone through a couple refi's in the last few years, and my advice is based on my experiences.
2011-08-19 10:25 AM
in reply to: #3650525

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Master
1543
100050025
Subject: RE: Is it time to Refi the mortgage
No PMI on a VA loan.  Also no DP required.  So its the numbers I posted +/- a few hundred for misc fees.  We are looking at actually paying the same amount, so it would be extra to principal.  The 15 yr option looks good to, but its a $700ish increase and although I could swing it now, I just like the option of the lower if I need it.
2011-08-19 10:48 AM
in reply to: #3650491

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Expert
1557
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Austin, TX
Subject: RE: Is it time to Refi the mortgage
sax - 2011-08-19 10:06 AM

With the market in turmoil somehow the interest rates continue to go lower.  Was looking at a refi now that rates are sub 4%.  Here are the particulars, let me know WWCOJD.

We currently have about 28.5 years left on a 30yr @ 5%

Offer is for refi the balance ($528K) at 3.875% for 30yr. Savings of $410/mo over current mortgage and around $90K in total interest over the term.

 

Total fees are 1% orig fee and .625 disc points, aprox $8500.  Bank (Navy Federal Credit Union) offering $2500 credit so out of pocket is about $6K.

We plan on staying here for 5-10yrs.

 

So is it worth it.  Well, it seems obvious I guess that its worth it.  Really what I want to know is what else should I be factoring in here?  Also, is it possible to play the bank against another bank to get better rate and/or better fees?

 

This is whats called a "Streamline VA refi".

Is it worth it?  Absolutely, as long as you can afford the $6000, you would be breaking even in less than 1.5yrs.  If you can't afford it you can still look into rolling the 6k into the loan, or have the discount point removed and get a slightly higher rate.  A general rule of thumb is if the rate is 1% or more lower than your rate then it is usually worth it (rates/fees being normal). 

And definitely shop rates.  I've had great luck using Lending Tree in the past.  You enter your info and 3-4 companies call you trying to compete for your business.  Just make sure and get the Good Faith Estimate from each company to use to compare.  If you are partial to your bank you could get the GFEs from other companies then take them to your bank and give them the opportunity to match/beat the offers. 

2011-08-19 10:49 AM
in reply to: #3650491

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Atlanta, Georgia
Subject: RE: Is it time to Refi the mortgage

Not an expert, but based on your numbers above...

$410 savings per month = $4920 per year.

If you plan to stay more than 2 years (sounds like you do) it would be financially "worth it" since you'd surpass the $6,000 up front investment.

I just re-fi'd at 4.5% (down from 6.4%) and am pleased. There were no real "surprises" to speak of at all.

2011-08-19 11:28 AM
in reply to: #3650491

Master
2083
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Houston, TX
Subject: RE: Is it time to Refi the mortgage

based on what you gave.... yes.  after 15 months you will have replaced your closing costs. I'm not sure how you are getting the $90K number but since you are not planning on living out the loan, you should consider only the savings for living there 5 - 10 years (I would consider 5 and any savings after that is gravy).  That's going to be your real number.  Quick and dirty math says you save 12 x 5 = 60 x $410 = $24,600 - $6,000 = $18,600. 

you may want to take into account the difference in equity at 5 years.  Amortization is front loaded on interest, so your payments to equity will likely change.  Looks like to me you will be increasing your principal payments by maybe $50 - $100 a month, giving you another $3,000 in equity at least.

Unless you just LOVE your bank, I'd shop around.  you may find one with lower closing costs or better rate.



2011-08-19 12:44 PM
in reply to: #3650491

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Master
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Subject: RE: Is it time to Refi the mortgage

thanks for the advice so far!  Went to lending tree and have 3 brokers competing right now.

 

So far I have same rate 3.875% for $3600 in fees and a 4% at $1400 in fees.

It's a math problem at this point...but so far they are beating my credit union.

2011-08-19 1:04 PM
in reply to: #3650491

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Regular
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Barrie, Ontario, Canada
Subject: RE: Is it time to Refi the mortgage

Why not refinance with an amortization of 28.5 years at the lower interest rate and continue to build equity in your house?

We do house mortgages a little different in Canada but would alot of people in the US been better off over the past few years if they had equity in their homes?



Edited by Mrdaner 2011-08-19 1:06 PM
2011-08-19 1:50 PM
in reply to: #3650491

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Expert
1557
10005002525
Austin, TX
Subject: RE: Is it time to Refi the mortgage
My best friend when refinancing is an online calculator like this one here.  It allows you to compare how the different rates and fees effect your bottom line and which one is the better deal overall.  There are many others out there.  The lowest rate is not always the best deal.
2011-08-19 5:34 PM
in reply to: #3650491

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Master
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Subject: RE: Is it time to Refi the mortgage
Thanks for posting this because you motivated me to do the same.  In my case I went with a 15 year loan this time.  Rates are insanely low right now.
2011-08-19 5:38 PM
in reply to: #3650491

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Master
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50005002525
Subject: RE: Is it time to Refi the mortgage

And definitely shop rates.  I've had great luck using Lending Tree in the past.  You enter your info and 3-4 companies call you trying to compete for your business.  Just make sure and get the Good Faith Estimate from each company to use to compare.  If you are partial to your bank you could get the GFEs from other companies then take them to your bank and give them the opportunity to match/beat the offers.

I have to say, be careful with this.  They blast your info out to a bunch of lenders and you'll get swamped by calls with high pressure pitches trying to get you to sign fast.  And be wary of anyone who wants to pull your credit info.  Don't consent to that until you've settled on the lender you're going to use, as it affects your credit score.

It irritated me enough that I took a drive over to the bank that holds my current loan and asked them what they could offer me.  It was a better deal than any of the other ones I had talked to so far, and less hassle.



2011-08-21 8:17 PM
in reply to: #3650491

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Master
1402
1000100100100100
Cumming, Georgia
Subject: RE: Is it time to Refi the mortgage
We recently refinanced with VA 5/1 Hybrid Arm at 2.5% for the first 5 years and a max 5% increase over the life of the loan.  The original loan was at 5.875 and we only had it for 2 years before we refinanced.  A lot of people tried to tell me not to do an ARM but we plan to sell in 8 - 10 years.  It will take us a little over a year to make up the refi fees.  We have every intention of continuing to make the original payment amount to build equity since we already budgeted the monthly paymeny.  It is a little gamble on the rate maxing out but it will take 8 years to be just under our original rate.  Worst case is after 10 years and we still have the house we will be paying 1.625% higher rate than when we originally purchased the house.
2011-08-22 7:35 PM
in reply to: #3650491

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Master
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100050025
Subject: RE: Is it time to Refi the mortgage

Well we went with a 4% no fees (which actually will be about $2100). we also get 2 months of no payments which is kind of nice.

So there it is, locked it in and saving just under $400/month.  Should take 2 weeks to fund.  so far this is the simplest refi ever. About 6 months we break even on the costs.  One if you look at it from a cash flow perspective.

 

This next 6 months is exciting in the world of bank financing, got one more rental to rate lock in Feb and possibly a business aqui loan as well.

 

2011-08-23 9:42 AM
in reply to: #3650491

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Expert
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Austin, TX
Subject: RE: Is it time to Refi the mortgage
Great job there Sax, glad everything worked out so well for you.  I love it when people are able to save money!
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