If the new interest rate is at least one percent less than I'm currently paying, since I plan to retire in this home, it would be a good strategy. The only way it works for the consumer is if the interest rate is low enough that over time the refinancing fees (averaging 2%-3% of existing loan), are made up over the course of the loan.
The correct answer is maybe. Rule of thumb used to be re-fi if you could obtain a mortgage rate at least 2% less than your current rate. Also depends on how much in points and other fees the re-fi would cost. If the lower payment can cover the points and fees within two years and you're staying in the home a good while longer than that, then it's probably a good idea.
Refinancing your home no matter what the rate is a bad financial decision. Unless the refinance is 100% free, it takes 7 years to stay in a home to break even on your refinance fees. Horrible investment.
You also want to make sure that: 1. You watch the principal loan amount balance. Once the balance is 80% and lower you can tell the bank that you want the PMI (Private Mortgage Insurance) removed from your payments. 2. Pay the same amount, even when your payment is lowered. You will pay off the mortgage faster if you apply the extra payment amount towards the principal balance.
Since our financial adviser has repeatedly helped us make good financial decision overall and he said it was a good time to re-fi, yes we would certainly look into it. There will be closing costs, but just a few years ago a lot of lenders and banks were promising no closing costs to the borrower on a re-fi, especially if one took out their original mortgage with that lender; so I'd search to see if there are attractive offers like that out there still.
" GO" , BUT, only of all the costs are included in the mortgage and no out of pocket cash is needed. save your cash and come out cheaper , and shorter time,after the contract /re-fi . THEN YES . OR if you do not like your banker/ advisor, you can switch as well. LOL.
Depends on how much equity you have in the house, what the costs of refinancing are, your credit score, what the rates will be, and what the break even time frame will be. Break even time frame = costs of refinancing vs reduction in the loan. How quick before you get that money back in lower interest rates? If your rate is 3-4%, then you'll recoup the costs quicker than if it was 5%. Also depends on the type of refinancing. Are you going 30 year to 30 year? Are you going 30 year to 15 year?
This is very timely! We sold our business and were arranging to do a recast of the mortgage, keeping our 3.875% rate. We were going to put $100,000 down, making the balance about $170,000. Our financial adviser is looking for a better rate to refinance. Now I'm thinking, that unless it's 1 or 2.875 or less, with no upfront fees, we shouldn't do it! Is that correct thinking?
It all depends. With the current interest rate environment, I would have long since refinanced. And I'd refinance as far out as possible - 30 yrs ... and as long as the rates were low, I'd make larger payments ... much like it were a 10 or 15 yr note. But if the interest rate environment went up or life threw a curve ball, my minimum monthly nut required would be relatively low. In fact, I've done the above strategy several times in the last decade ... assuming current rate, house will be...
NANAWALLER14 , right now you are at or slightly below market mortgage interest rates so I would think you might be best, if you want to try to get your mortgage paid off, to just apply $100K towards the principal of your current mortgage if you are still able to make the current monthly payment you have. Or, invest that $100 into something that is bringing a higher interest rate than 3.875. You overall portfolio and current income might be leading the decision.
NANAWALLER14 I didn't realize some mortgage companies and banks were doing this, never heard of it and I'm a retired real estate broker. Never to old to learn!! That is fantastic!! Any fine print? A bit amused they are charging even $50 to give them 100K, they should be paying you to park your funds there!!!
I would love that question answered! It scares me since credit is a factor! I want to know how you find out what mortgage companies are fake on line! I want to refinance! But very Leary who to speak with
All we need is love, PMI is an aggravating and pricey add-on to your mortgage payment by lenders for insurance that protects THEM, not you, in case you default on the loan. What's even more aggravating is that during the crash of 2008 and on, the PMI insurance companies many times came back on the homeowner who had been paying for the insurance and filed judgments against them for the loss they incurred by what they paid out to the mortgage companies because of foreclosures. PMI or MIP...
How would that be paying extra interest? If anything, the person would end up paying less interest as they would be paying a lower interest rate. Now, granted, my statement above is only valid if the person refinancing is wise enough to: keep paying at least the same payment amount as before they refinanced refinance with an interest rate that creates a saving that is higher than the closing costs refinance for an interest rate that is less than the current loan's interest rate refinance...
We refinanced 7 years ago , saved $75 per month on our monthly payments and got a 10 year loan instead of the 30 year we had previously. Just switched to another bank that I had a good relationship with and it was pretty easy. Didn’t take much time either. Our current interest rate is 3%.
The financial advisor doesn’t always see your complete financial situation. The interest rate itself should not determine your decision. I choose not to refi even when market interest rate was lower by 3 points because I would end up paying more interest on the new loan with the additional payments I made each month.
Length of time should be an irrelevant variable into the equation. I almost always recommend doing a no cost refinance, not adding anything to the backend, and even keeping the term as your existing note. i.e. you've got 23 years left on your current mortgage, refinance with a 23 year note ... yes they can be done. There's always a cost, and I recommend that cost be placed in the interest rate. Usually you'll pay 1/4 - 1/2 % more on a no-cost refi. Bottom line: Debt amount stays the same,...
The Annual Percentage Rate (APR) is *the cost you pay each year to borrow money, including fees*, expressed as a percentage. The APR is a broader measure of the cost to you of borrowing money since it reflects not only the interest rate but also the fees that you have to pay to get the loan.
I voted that I no longer have a mortgage, but we did refinance our then mortgage in 2013 when rates were much lower than the original. This made it possible to pay extra to the principle and we paid it in full December 2019.
Since we bought our home many years ago, we did a refi later for a lower % interest, our realtor stated if you are going to refi, be prepared for all the ancillary costs associated with it. Also, make the refi worthwhile, meaning dropping by at least 2%, otherwise it is not worth it.
Oh yes! My wife and I looked into giving it a try on the advice of my good friend and barber. We'd only been in our home about 2 years, so I wasn't sure we had enough equity to do it. Man was I wrong! Not only were we able to refi at 3% and save tons in interest and $200 on our mortgage payment, but we were also able to kill our PMI from the previous loan!!! Woooo Hoooo!!! We consider ourselves very lucky to get it done.
We've actually refinanced twice since buying in 2019. The second time was when the interest rates dropped dramatically thanks to COVID. Ironically, we actually ended up with a higher payment since we flipped from a 30 year to a 20 year lol.
@Stephanie C that is what I would have like to do in terms of a 20 year mortgage. But I figure if we send in some extra towards the principal. We can at least pay it off a little quicker. Good for you guys!
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