does it make sense to refinance twice within ~1 year?

Status
Not open for further replies.
Jul 10, 2007
12,041
3
0
my original mortgage was 6.65% in july 2007 (30 year conventional fixed).
i refi'd at 5.495% (with 1 point, again 30 yr) in jan 2008.
now there's rumor that rates may hit 4.5% and i may save another ~$150 a month.
what gets me is that point i paid during my 2008 refi... that's just $ down the drain.
it's a condo, bought for $350k with $100k down. probably worth $330-340k now if i were to sell today.


2nd question.
i have another property that i'm definitely going to refi in the next few days/weeks - 6.35% aug 2008.
current mortgage on that property is through another bank. can i consolidate the 2?
 

dullard

Elite Member
May 21, 2001
25,920
4,509
126
Points are almost always money down the drain and are often wise to avoid. You have to consider that in the purchase / refinance of any home. There are times and places to pay points, but you really must consider the plusses and minuses of them.

Lets say you have a $1000 refinance cost (repaying title insurance to prove that you don't owe money to yourself on a home that you already have title insurance really gets me). Lets say you paid 1 point (1%) on $250k. So your refinace cost you $1000 + $2500 = $3500. But you saved $240 a month in interest by going from 6.65% to 5.495%. If you refinance today you'll have saved that interest for 12 months. Meaning you saved $2880 in interest by paying $3500. Note: you also lost $192 by paying that refinance money upfront.

Total net: $2880 gained - $3500 - $192 = -$812. Your refinance in Jan 2008 lost you $812 if you refinance now. It was the points that did it to you. If you didn't pay points, you probably would have got an interest rate near 5.75%. That meant you would have paid $50 more per month for 12 months ($600). But the points cost you $2500 (+$192 interest on the points). Your refinance would have been a good idea if you didn't pay those points.

A rule of thumb is NOT to refinance unless you can save well over 1% on the interest rate. Are you willing to risk losing another $812? (You'll lose it if you refinance a third time or if you have to sell your house). You could gain if you keep this new refinance for many years though.

IF (1) you can find a refinace with low refinance costs, (2) low to no points, and (3) you plan to not touch the mortgage for at least a few years, then you will gain my refinancing now. If not, wait and see if rates go below 4%.

Sadly, I doubt any bank would let you consolidate two properties. That is theoretically possible in a different world, but banks are rigid and won't do it.
 

nakedfrog

No Lifer
Apr 3, 2001
61,883
17,625
136
Originally posted by: dullard
Lets say you have a $1000 refinance cost (repaying title insurance to prove that you don't owe money to yourself on a home that you already have title insurance really gets me).

That irks the hell out of me, and I think it should be illegal.
 

Blieb

Diamond Member
Apr 17, 2000
3,475
0
76
Is the other property an investment property?

Depending on the use and LTV you might not beat that rate ...
 

Bryophyte

Lifer
Apr 25, 2001
13,430
13
81
Wouldn't consolidating the two mortgages just make it easier to lose both properties? If you have an emergency where you can't pay both, but can pay one, you will only default on and lose one property. If you combine them, you'll lose both if you can't pay.
 
Jul 10, 2007
12,041
3
0
Originally posted by: dullard
Points are almost always money down the drain and are often wise to avoid. You have to consider that in the purchase / refinance of any home. There are times and places to pay points, but you really must consider the plusses and minuses of them.

Lets say you have a $1000 refinance cost (repaying title insurance to prove that you don't owe money to yourself on a home that you already have title insurance really gets me). Lets say you paid 1 point (1%) on $250k. So your refinace cost you $1000 + $2500 = $3500. But you saved $240 a month in interest by going from 6.65% to 5.495%. If you refinance today you'll have saved that interest for 12 months. Meaning you saved $2880 in interest by paying $3500. Note: you also lost $192 by paying that refinance money upfront.

Total net: $2880 gained - $3500 - $192 = -$812. Your refinance in Jan 2008 lost you $812 if you refinance now. It was the points that did it to you. If you didn't pay points, you probably would have got an interest rate near 5.75%. That meant you would have paid $50 more per month for 12 months ($600). But the points cost you $2500 (+$192 interest on the points). Your refinance would have been a good idea if you didn't pay those points.

A rule of thumb is NOT to refinance unless you can save well over 1% on the interest rate. Are you willing to risk losing another $812? (You'll lose it if you refinance a third time or if you have to sell your house). You could gain if you keep this new refinance for many years though.

IF (1) you can find a refinace with low refinance costs, (2) low to no points, and (3) you plan to not touch the mortgage for at least a few years, then you will gain my refinancing now. If not, wait and see if rates go below 4%.

Sadly, I doubt any bank would let you consolidate two properties. That is theoretically possible in a different world, but banks are rigid and won't do it.

good info, thanks.
i guess i can afford to lose the money to points since i'll probably save over the life of the loan.
the first time around, i didn't foresee rates dropping even lower. I mean at low-mid 5's, those were pretty much historic lows at the time.

i should add i plan to keep this property for life, barring some very unforeseen circumstance. it'll eventually become rental property.
 
Jul 10, 2007
12,041
3
0
Originally posted by: Bryophyte
Wouldn't consolidating the two mortgages just make it easier to lose both properties? If you have an emergency where you can't pay both, but can pay one, you will only default on and lose one property. If you combine them, you'll lose both if you can't pay.

never thought of that, and never thought it will come to that.
i guess in this economy, anything is possible.

was thinking more in terms of saving on closing costs, on common application fees and what not.
 

MattCo

Platinum Member
Jan 29, 2001
2,198
2
81
So here is a question for you finance geeks:

I have had a 30 year, 6.25% loan for 37 months - meaning a huge percent of each payment goes towards interest each month.

When I do the calculations, if I stop the loan right now (for a refinance), I will basically have paid 191% interest on a 37 month loan. Does that seem correct?

-Matt
 
Jul 10, 2007
12,041
3
0
Originally posted by: MattCo
So here is a question for you finance geeks:

I have had a 30 year, 6.25% loan for 37 months - meaning a huge percent of each payment goes towards interest each month.

When I do the calculations, if I stop the loan right now (for a refinance), I will basically have paid 191% interest on a 37 month loan. Does that seem correct?

-Matt

go look at your amortization schedule.
 
Status
Not open for further replies.