Also, consider your future plans. Are you subject to transfer? I had to move 3 times due to transfers.

A low mandatory payment with cheap interest is almost as comforting as a paid off home. We are about to close on a refinance at 2.75% down from 4%. Knowing that we could carry that payment on one salary and not get eaten alive by interest is enormously calming when times are uncertain.
Plus, as already stated, making your usual payments on principal will be even more impactful.

Bruce

You have to do the math, but based upon the sounds of it, it doesn't matter what rate you'd refi to, you'd be paying more. Mortgages are preloaded to where you pay the bulk of the interest in the first half of the loan versus the last half,and if you only have 5 years left, you've probably paid 85% of the interest packed into your loan and virtually everything is going to principle. If you refinance you're starting that interest curve all over again. You need to see a current amortization table on your mortgage. Or just calculate all remaining payments and get a total.......then go to a mortgage calculator and put the specs in for the new mortgage and see what that total would be.

In case there is anyone else like me who has read this and other refinance threads and still been on the fence, now is a great time to get off it, or at least have someone run the numbers and make a decision.

I am 8 years into a 30 year fixed at 3.5§. I’m closing next week on a refinance to a 15 year fixed at 1.99%. Even adding in the loan costs and government fees, my payment is dropping significantly. Between the reduced interest rate and the seven year shorter term I’ll save about $100k in interest over the life of the loan.

YMMV, but it’s worth looking into. Prices are sky high which helps with LTV. If you aren’t going to sell you can still get some benefit from this stupidly high market.

Back when we had a mortgage, we re-financed a couple of times. In both cases it was a simple question to the mortgage broker, “What is the best rate you can get us on a zero cost refi?” In both cases it was a lower rate than our then current mortgage, so we went ahead. If you do the same with the shortest term you can get and continue paying at the rate you are you’ll pay the loan off faster.

Another option to consider: If the shortest term fixed rate loan that you can get is a higher rate than the initial on an Adjustable Rate Morgage (ARM) which is fixed for the first seven years, you may want to go that route and save even more. If you keep paying as you are currently, regardless of the new lower payments on a new loan, then the lower the interest rate, the quicker you pay it off.

Yes, you can (or at least you used to be able to pay points and “buy down the rate”, and this may make sense, but you have to do some math to decide. If you can get a lower rate at no cost, you are better off refinancing, no math needed.

I don't use brokers. I use a mortgage bank that charges about $300 for refi, but you have to have a fully conforming loan and excellent credit. Be careful of zero upfront cost loans if they bake the closing fees into the loan. Costs more in the long run. Mine are just the application fee with all the closing fees are comped, nothing baked into the load.

I refinanced my house a few times when I was married. After getting divorced I did a cash out refi to pay my ex her equity and got a 5/1 ARM (30 year amortization) at around 3.5% (30 year fixed would have been 5% on a cash out. After 5 years they sent a letter that the rate would go up the maximum 2% to 5.5%, so I started a refi and ended up at 4.25% for 20 years. Then I got the letter that the rate would only go up to 4.25%. Was not too happy about wasting my time like that. A year later in Q1 2020 I refi'd again to 3% on a 15-year. Haven't done anything since.

I'd do something pretty fast because interest rates may go up if inflation stays at it's current rate.

If you are killing it like that, and expected to pay it off in 5 years then the hell with refinancing.

I’d do it if you need to carve off cash to remodel, upgrade, etc. Otherwise I just wouldn’t mess with it.

quote:

Originally posted by Boss1:
If you could get a ~2% reduction, it might be worth considering.

But if you're going to have it paid off in 5 years, might not be worth the hassle.

$.02 worth,
Boss

I've only got about 8 years left on my Wells Fargo mortgage, 3.8%. That interest rate sounds high, but they won's refinance to a lower rate because I only owe about $50,000 and not enough years left. They want you to refinance at a lower rate, but extend the years. No thanks. I also send in an additional $100.00 a month going to the principal.

One thing to consider that no one has mentioned is to call your current finance company and tell them that you are considering refinancing and what would they be willing to do in a no cost refi…

The rate may not be as low as you can possibly get (typically .25% more) but it should result in no additional costs for you.

We did this twice over the years…

Find a local community bank and see if their various fees are lower than brokers and big banks.
My last mortgage refi was a small fraction of the others. They knew the local market well enough (and I only owed about 1/3 of the value)that they didn't require an appraisal and some other stuff and let me use my own local attorney who did the paperwork for a few hundred. Brokers find the money and add their markup and the big banks just overcharge for everything.
Otherwise, it's all a just a simple math question.

This is the simplest thing in the world. Even if you don’t understand the math it’s pretty simple and you make the lender explain it to you till you do understand.

It is irrelevant whether you plan on paying it off in 5 years or 50 years. It’s just math. You find out the actual cost of the refi. You find out your new payment. You divide that savings (old payment minus new = savings) into the first and this tells you the breakeven point. If it’s even a day prior to your “planned” payoff then refi.

Don’t discount the above advice either. Just because you can make extra payments today doesn’t mean you can tomorrow. Dropping nearly 2 percentage points off your loan it’s really a no brainer. Shop around for cheapest refi and do the math. You will save money I promise.

Do it now while rates are low. They aren’t going to stay low forever.

Once I refinanced truck loan. Saving $20 a month. The bank officer complained that it was "only $20 a month" compared to the paperwork required. "I'd rather have a extra $20 in my pocket every month than not" shut that conversation down right quick.

Yup. Math unlike most things in life doesn’t lie. If it saves you a sawbuck it saves you a sawbuck. It’s just that simple. Asking us is retarded. We don’t know any particulars to your situation. Maybe you have horrible credit and nobody but loan sharks will lend you money.

You have to go ask the questions to a bank, lender, or mortgage broker. And don’t ask just one. Someone will offer the best deal. Then do the math and save money. 4+ percent in today’s market screams out refi without even knowing your particulars.

(The caveat of course is total cost not the ridiculous lower monthly cost nonsense that car dealers try to sell you. Figure out your actual no shit breakeven point.)

I just dropped my rate from 3.375 to 2.375 a year into a 30-yr mortgage. Taking some money out and added about 45k to my loan amount, but dropping my payment $1000 per month. So ~ 4 year break even. We plan to stay here at least 15 to send the kids to school. Without the cash we're taking out, it'd only be about 2.5 years to break even. No brainer.

For you, plug in the numbers.
X = current debt
Y = new debt after refi
A = current payment
B = new payment after refi

Y-X = Z (the difference in the total debt, which will now be slightly higher)

A-B = C (the difference in your payment, which will now be lower)

Z/C = months til break even

If that number is less than your current mortgage's payoff date, then it saves you money.

quote:

The bank officer complained that it was "only $20 a month"

Says the same bank that would pay $20 a month if you had $45,000 on deposit for an entire year.

When calculating the break even don't forget to subtract out the years you've been paying off. For example, if you're 4 years into a 30 year mortgage and re-fi back into a 30 year mortgage with a lower payment you're not comparing apples to apples.

You would need to compare your new loan at 26 years, not 30.

Have you seen if they will do a 5 year refinance?