PSA - look to refinance mortgage now

[interchange]

0.5% is the rate savings I've heard where it generally makes financial sense to refinance. Obviously, that is not a one size fits all number.

Personally, I'm 5 years into a 30 year mortgage and not even sure of the rate but confident I could shave off a huge chunk. Good news on that is no penalty to pay it off and no PMI. We will probably move in 2 years time, so I think I'll look for a 15-year fixed no cost no points that, given rate reduction and shorter term may even end up within $100 of what we're paying now all-in. I'm not sure what would require PMI, but I think it would be insane to require it as the home is probably worth twice+ the remaining mortgage balance. My income and credit should be way more than what's needed for the mortgage amount.

Probably going to try and find a broker. I don't consistently have the time to shop around independently, and I'm loathe to give out personally info and get hammer called for a little while. If anyone has any recommendations or other advice for me, I'm all ears. I'm not sure I understand everything correctly about this topic.

 

[fskimospy]

It's a fine balance between things.

Paying extra on your mortgage is a guaranteed rate of return - the stock market is not.
Additionally, you can generally tell if something is going to be a good investment year or not.
Personally I hedge bets and put money into both every year.

Also homes are an investment (IMHO) - I say that only because it's something that generally appreciates with time. You should always go into a home purchase with that in mind. When you need to make a home purchase, one of the first questions you should ask yourself is "Will this home go up in value or down in value based on what is happening in the area surrounding it?"

It is entirely unlike a vehicle which depreciates with time.

Well sure but the annualized rate of return on the S&P500 over a 30 year time frame is around 8%, which is 2-3 times that of current mortgage rates and since we're talking about a home purchase it's best to look at the S&P over a long time horizon. While nobody knows what tomorrow will bring with that kind of

As far as homes being an investment they are only an investment if you are planning on eventually selling it and moving to an area with a lower cost of housing. Otherwise, it's just a form of rent control with a high barrier to entry.

I hinted at this earlier - but homes have a tax advantage as well. I forget what it is - but I think the cutoff is even if you make $100k+ in profit on your home sale, you don't have to pay taxes on that profit.

You don't get that out of any other investment, so that's worth noting.

That tax advantage exists regardless of whether or not you make extra principal payments as it reflects your gain over cost basis.

 

[repoman0]

How is it idiotic just because ammortization table is reset? What just because your loan starts over at 30 years? That doesn't mean you can't make higher payments.

If it saves you a percent (hell, even .5%) of interest, and you don't have to pay big closing costs, how is it not a win?

It's only not a win if you don't understand basic math and interest rates, as that poster doesn't seem to.

 

[Dulanic]

Doesn't refinancing reset the ammoritization table? To save a percent would be idiotic with a 30 year loan if that's the case. Which is why banks like to encourage idiots to refinance.

As someone else said, how is this an issue? You can always pay extra to cut down the timeframe...

 

[fskimospy]

As someone else said, how is this an issue? You can always pay extra to cut down the timeframe...

Exactly, unless you have some sort of early payment penalty you could just literally continue paying whatever it is you were paying before and pay off the mortgage X years early.

 

[Dulanic]

Exactly, unless you have some sort of early payment penalty you could just literally continue paying whatever it is you were paying before and pay off the mortgage X years early.

Hell pay your old payment amount, win win all around.

 

[s0me0nesmind1]

It's only not a win if you don't understand basic math and interest rates, as that poster doesn't seem to.

I was going to say, unless there's some hidden math I'm not aware of lol....

Hell pay your old payment amount, win win all around.

Exactly, unless you have some sort of early payment penalty you could just literally continue paying whatever it is you were paying before and pay off the mortgage X years early.

I can only guess the dude lives of a life "Pay the minimum" so when you reset the amortization he just goes "OH NO! I Paid off 10 years now I gotta start back at 30!"

 

[ponyo]

Thanks for the reminder. I don't follow the mortgage market because I don't have a mortgage. I paid mine off years ago but my sister still does. I need to find out what her current rate is. I think I had her refinance like 8-10 years ago from a 30 year into a 15 year mortgage. She hated the higher monthly payment at first but I told her she would get used to it. She's someone who will only pay the minimum unless forced. She doesn't have that many years left on the mortgage now but I'm sure it's probably like the double of the current rate.

Personally I don't think the rates are going up anytime soon. I hope it's still around when I'm looking for mountain or beach investment property in about 2 years.

 

[Dulanic]

Thanks for the reminder. I don't follow the mortgage market because I don't have a mortgage. I paid mine off years ago but my sister still does. I need to find out what her current rate is. I think I had her refinance like 8-10 years ago from a 30 year into a 15 year mortgage. She hated the higher monthly payment at first but I told her she would get used to it. She's someone who will only pay the minimum unless forced. She doesn't have that many years left on the mortgage now but I'm sure it's probably like the double of the current rate.

Personally I don't think the rates are going up anytime soon. I hope it's still around when I'm looking for mountain or beach investment property in about 2 years.

Yeah I get the feeling they may bounce for a short bit, but may stay in this area for a while. Since I could get a refi /w closing costs covered to drop me .375% I took it. Worst case, if it drops more.... I refi again! It didn't cost me anything.

 

[hal2kilo]

God, will this F'n refinancer stop wearing my answering machine out. Yes, the rates have come down. Avalon CA number.

 

[IronWing]

God, will this F'n refinancer stop wearing my answering machine out. Yes, the rates have come down. Avalon CA number.

I CAN SAVE YOU MONEY!

 

[TheVrolok]

How illiquid it is still doesn't take away that it is an investment.

Also not sure where you live (CA?) but homes here (In TX) are typically gone in a week. My home sold the next day in less than 24 hours (this was <1 year ago).

Perhaps the problem is, as I said early, our definition of investment. Certainly, a house (primary residence) is something that can have a positive return. It's just, generally, not a very competitive return compared to other investments and is far more labor intensive than they are. I appreciate your anecdote, but most people aren't able to list, sell, and move into a new place in a matter of weeks.

As far as the math of the investment I'll borrow from another link

Is Buying a House a Good Investment? It Depends...

Buying a house has long been a staple of the American dream but is buying a home always a good investment? It depends.

www.listenmoneymatters.com

Imagine you financed your $100,000 home 30 years ago at a low 5% interest rate and today your home got appraised at $300,000!

Wow, you got a total return of 200%! What a great investment, right? To answer, we must look beyond just the mortgage payment.

Over 30 years you paid $92,422.95 in interest to the bank. Add in $2,000 a year for 30 years for taxes and insurance. This is a total price of $252,422.95 so far.

What about ongoing maintenance and repairs? A popular rule of thumb states you will average 1% of the purchase price in ongoing maintenance and repairs, so now we need to add in $1,000 for each year. That brings the grand total investment to $282,422.95. We didn’t even account for inflation which averages 3-4% a year.

The 200% total return, or 3.7% annual return, is now looking more like a 0% forced savings account. When you eventually sell the house you will get a nice big check but don’t confuse it with an investment, you are just getting money out that you put in over the years.

This doesn't take into account any significant remodelling which would most likely (although perhaps not always depending on location) need to be done in a house being sold after 30 years for a 200% increase in value.

Putting the same amount of money in a brokerage account and letting it sit in an index fund would get you far better returns. These would come around retirement age for most people if we're talking a 30 year time frame so it may be possible to manipulate the capital gains taxes by controlling your post retirement income to limit your taxes.

Will a house (often) often have a positive return? Perhaps, particularly if you have flexibility in timing the sale, but you're just not going to make the % returns you'll make in other vehicles which is why a house is, generally, at best a hedge against inflation.

So is it "technically" an investment? Well, it's something you can put money into that can appreciate in value so sure, it is. It's just not a good "investment" when we traditionally talk about investments with regard to chasing gains.

This is not to say there aren't other less tangible benefits of home ownership. As much as a PITA home ownership can be, I enjoy having my own space, privacy, etc. that I'm happy to pay a premium (get less return in the end) for.

A lot higher than that. $250K for individual or $500K for married.

Technically could be even higher as I think you can work in some remodeling costs.

 

[Jhhnn]

How is it idiotic just because ammortization table is reset? What just because your loan starts over at 30 years? That doesn't mean you can't make higher payments.

If it saves you a percent (hell, even .5%) of interest, and you don't have to pay big closing costs, how is it not a win?

Another way to play it is to refinance to a shorter term mortgage. If you've been in a 30 year note for, say, 6-8 years you may be able to get a 20 year note & keep the monthly payment basically the same. If your circumstances have improved you could go to a 15 year note with somewhat higher payments. Any fixed rate arrangement that suits your circumstances & knocks a full % point off the interest rate is well worth doing. If your credit & equity are right, it's a turnkey deal with nothing out of pocket.

 

[Jhhnn]

Well sure but the annualized rate of return on the S&P500 over a 30 year time frame is around 8%, which is 2-3 times that of current mortgage rates and since we're talking about a home purchase it's best to look at the S&P over a long time horizon. While nobody knows what tomorrow will bring with that kind of

As far as homes being an investment they are only an investment if you are planning on eventually selling it and moving to an area with a lower cost of housing. Otherwise, it's just a form of rent control with a high barrier to entry.


That tax advantage exists regardless of whether or not you make extra principal payments as it reflects your gain over cost basis.

The barrier to entry isn't necessarily high at all. FHA loans can be had for as little as 3.5% down. VA loans even less. Rent control? You betcha! Depending on where you live, that can be a very, very good thing. Denver rents have more than tripled in 30 years. The house payment remains the same throughout. The end result is paying no rent at all, other than upkeep & utilities. Seniors who rent need much higher incomes to live as well as those who own homes outright or even seniors making the same payment they did 25 years ago.

 

[TheVrolok]

If your credit & equity are right, it's a turnkey deal with nothing out of pocket.

Outta curiosity, not sure if you have the experience, or anyone here for that matter, how often are lenders willing to offer no closing cost options? And then when they do, how often are those costs shared as a bit of extra interest percentage vs just rolled into the mortgage (so nothing technically up front)? And of loans made, how often do they have prepayment penalties?

Local credit union is offering like 3.0 fixed on a 30 year term which is a full 1.5% lower than my current 4.5. Will have to call them tomorrow with the above questions. If I could do another 30 year term for another 0.125 to waive closing costs (as a poster above said), and still pay early as I do (no early payment penalty) that sounds like a no brainer.

 

[Jhhnn]

0.5% is the rate savings I've heard where it generally makes financial sense to refinance. Obviously, that is not a one size fits all number.

Personally, I'm 5 years into a 30 year mortgage and not even sure of the rate but confident I could shave off a huge chunk. Good news on that is no penalty to pay it off and no PMI. We will probably move in 2 years time, so I think I'll look for a 15-year fixed no cost no points that, given rate reduction and shorter term may even end up within $100 of what we're paying now all-in. I'm not sure what would require PMI, but I think it would be insane to require it as the home is probably worth twice+ the remaining mortgage balance. My income and credit should be way more than what's needed for the mortgage amount.

Probably going to try and find a broker. I don't consistently have the time to shop around independently, and I'm loathe to give out personally info and get hammer called for a little while. If anyone has any recommendations or other advice for me, I'm all ears. I'm not sure I understand everything correctly about this topic.

Careful with that if you plan on moving soon. The fees involved actually raise the loan balance. It takes time to offset that. Just saying.

 

[Jhhnn]

Outta curiosity, not sure if you have the experience, or anyone here for that matter, how often are lenders willing to offer no closing cost options? And then when they do, how often are those costs shared as a bit of extra interest percentage vs just rolled into the mortgage (so nothing technically up front)? And of loans made, how often do they have prepayment penalties?

Local credit union is offering like 3.0 fixed on a 30 year term which is a full 1.5% lower than my current 4.5. Will have to call them tomorrow with the above questions. If I could do another 30 year term for another 0.125 to waive closing costs (as a poster above said), and still pay early as I do (no early payment penalty) that sounds like a no brainer.

It's been a long time but we paid nothing out of pocket when we re-financed in the late 90's. My mother paid nothing 10 years ago. You can even take cash out at closing, depending. People do it regularly to pay for college or to retire other high interest debt that got out of hand, like during extended unemployment.

By all means, check it out. Independent mortgage brokers often have the best deals, so it pays to shop around sometimes. It's free.
.

 

[Dulanic]

Outta curiosity, not sure if you have the experience, or anyone here for that matter, how often are lenders willing to offer no closing cost options? And then when they do, how often are those costs shared as a bit of extra interest percentage vs just rolled into the mortgage (so nothing technically up front)? And of loans made, how often do they have prepayment penalties?

Local credit union is offering like 3.0 fixed on a 30 year term which is a full 1.5% lower than my current 4.5. Will have to call them tomorrow with the above questions. If I could do another 30 year term for another 0.125 to waive closing costs (as a poster above said), and still pay early as I do (no early payment penalty) that sounds like a no brainer.

This can change day to day. You can usually use a slightly higher rate to get a closing credit. EX. This morning a 3.125 would had gotten me a 4k credit but by afternoon it was only 2k credit.

 

[ch33zw1z]

I think it's time. Calling a couple places tomorrow

 

[cytg111]

Arh it will get worse than this... and thus cheaper.

 

[Lost_in_the_HTTP]

I'm at 0.00% with a $0 balance. Paid in full.


Just sayin' ....

 

[s0me0nesmind1]

I'm at 0.00% with a $0 balance. Paid in full.


Just sayin' ....

Cool story, bro. Want to pay off some other's that don't happen to have a mortgage loan long enough to have paid it off?

 

[snoopy7548]

Perhaps the problem is, as I said early, our definition of investment. Certainly, a house (primary residence) is something that can have a positive return. It's just, generally, not a very competitive return compared to other investments and is far more labor intensive than they are. I appreciate your anecdote, but most people aren't able to list, sell, and move into a new place in a matter of weeks.

As far as the math of the investment I'll borrow from another link

Is Buying a House a Good Investment? It Depends...

Buying a house has long been a staple of the American dream but is buying a home always a good investment? It depends.

www.listenmoneymatters.com

This doesn't take into account any significant remodelling which would most likely (although perhaps not always depending on location) need to be done in a house being sold after 30 years for a 200% increase in value.

Putting the same amount of money in a brokerage account and letting it sit in an index fund would get you far better returns. These would come around retirement age for most people if we're talking a 30 year time frame so it may be possible to manipulate the capital gains taxes by controlling your post retirement income to limit your taxes.

Will a house (often) often have a positive return? Perhaps, particularly if you have flexibility in timing the sale, but you're just not going to make the % returns you'll make in other vehicles which is why a house is, generally, at best a hedge against inflation.

So is it "technically" an investment? Well, it's something you can put money into that can appreciate in value so sure, it is. It's just not a good "investment" when we traditionally talk about investments with regard to chasing gains.

This is not to see there aren't other less tangible benefits of home ownership. As much as a PITA home ownership can be, I enjoy having my own space, privacy, etc. that I'm happy to pay a premium (get less return in the end) for.



Technically could be even higher as I think you can work in some remodeling costs.

Yep. I see it as more of a lifestyle choice than an investment. After you factor in interest, real estate taxes, maintenance, increased utility costs, and how much more money you could have saved/invested if you didn't have a mortgage, you're not really coming out that far ahead.

But I like having a garage, being able to make as much noise as I want, doing woodworking, and having a stable place all to my own that I can call my home.

 

[Bitek]

Doesn't refinancing reset the ammoritization table? To save a percent would be idiotic with a 30 year loan if that's the case. Which is why banks like to encourage idiots to refinance.

If you use the refi to extend the loan, yeah, maybe not the wisest plan unless you got a cash flow problem.

If you're using the extra cash just to buy more booze, very much not a good plan.

But using the refi to shorten the loan while not adversely impacting your cash flow situation, pretty clever imo, and will save thousands over the life of loan.

 

[Bitek]

0.5% is the rate savings I've heard where it generally makes financial sense to refinance. Obviously, that is not a one size fits all number.

Personally, I'm 5 years into a 30 year mortgage and not even sure of the rate but confident I could shave off a huge chunk. Good news on that is no penalty to pay it off and no PMI. We will probably move in 2 years time, so I think I'll look for a 15-year fixed no cost no points that, given rate reduction and shorter term may even end up within $100 of what we're paying now all-in. I'm not sure what would require PMI, but I think it would be insane to require it as the home is probably worth twice+ the remaining mortgage balance. My income and credit should be way more than what's needed for the mortgage amount.

Probably going to try and find a broker. I don't consistently have the time to shop around independently, and I'm loathe to give out personally info and get hammer called for a little while. If anyone has any recommendations or other advice for me, I'm all ears. I'm not sure I understand everything correctly about this topic.

There are refi calcs out there for an easy way to run the numbers through.

Old loan vs new loan plus refi costs and spits out payback period.

There are qualitative considerations, but the numbers are easy to run rather than guess on a time of thumb.