refi question

[dabuddha]

I've got my closing scheduled for this coming Monday and had some questions about the deal I'm getting

Old mortgage
4.5%
339 months to go (30 years fixed)
190.9k

new mortgage
3.5%
30 years fixed
194.9k

old escrow account has about 1.1k in it
The total closing costs for the new mortgage comes out to 3k which includes 1.4k for the new escrow account so effectively it'd be 1.9k?

The payoff amount for the old mortgage is 191k (basically I'm rolling the closing costs into the new mortgage because I just don't have the cash right now)

The difference between my old principle + interest and the new one is $116 / month

yay or nay?

 

[shortylickens]

My mom says do NOT re-extend yourself for decades just to save a lousy 116 a month.

 

[dabuddha]

I agree on that If I was deeper into my existing loan, I wouldn't refi but I'm only 1.5 years into it. On a side note, I do plan on paying it off much earlier once my wife starts working. But that won't be for at least 5 more years.

 

[ALIVE]

I've got my closing scheduled for this coming Monday and had some questions about the deal I'm getting

Old mortgage
4.5%
339 months to go (30 years fixed)
190.9k

new mortgage
3.5%
30 years fixed
194.9k

old escrow account has about 1.1k in it
The total closing costs for the new mortgage comes out to 3k which includes 1.4k for the new escrow account so effectively it'd be 1.9k?

The payoff amount for the old mortgage is 191k (basically I'm rolling the closing costs into the new mortgage because I just don't have the cash right now)

The difference between my old principle + interest and the new one is $116 / month

yay or nay?

so you will have 21 more months to pay
in the end you will pay 4k more

so the real question is do you really need the 116$ per month?!?!?!?
if yes then extent if not keep the old one

you can always do that in a later time if needed
and the more you have repaid the better for you

 

[dabuddha]

so you will have 21 more months to pay
in the end you will pay 4k more

so the real question is do you really need the 116$ per month?!?!?!?
if yes then extent if not keep the old one

you can always do that in a later time if needed
and the more you have repaid the better for you

I could definitely use the $116 / month, no doubt about that lol. Would it make sense to take that $116 and multiple that by 360 months to get a rough amount of what I'd be saving? ( I know it won't be accurate since the old loan only has 342 months to go)

 

[EagleKeeper]

You have had the existing for 3 years. It will take you 3 more years to get back the closing costs in terms of savings from they lower rate.

Essentially, you have changed your loan from an original 30yr to a 36 year loan in terms of equity.

Over long term, justifiable. If you leave in the next 6 years with no increase in value; you are on yhe overall end of losing value. Remember the new loan must write off the 3k over 30 years, not in the first year.

 

[DAGTA]

http://www.bankrate.com/calculators/mortgages/refinance-calculator.aspx

I don't think I would take the deal you are being offered. Rolling costs into the new mortgage mean you will be paying interest on those costs. If you only pay the minimum each month, you're not saving money.

If your budget is so tight that an extra $116 per month makes that big of a difference, I think you need to look at your spending habits and make some cuts.

 

[Capt Caveman]

If you can, how do you come out if you refinance for 25 years and not 30?

 

[dabuddha]

Ahhh one other thing. The total amount I'm getting is 194.9 and the payoff is 191 which means I'll be getting 3.9 extra. 1900 of that will be going towards the closing costs so the remaining 2k I was going to put right back into the existing mortgage towards the principle (would that effectively lower my new mortgage amount to 192.9k?)


DAGTA: Agreed with you on that, we've cut as much as we can in our budget. Just with 2 of my kids starting school this year, I want to have a little cushion for extra expenditures.

Eagle: I didn't understand that. I've had the existing loan for about 20 months now, not 3 years.

 

[dabuddha]

I used the link you mentioned DAGTA but it doesn't take into account if you finance your closing costs. I found this calculator at realtor.com:

http://www.realtor.com/home-finance...rtgage-refinancing-calculator.aspx?source=web

and it comes back with:

New Monthly Payment: $870.25
Monthly Savings: $120.75
Months to break even on closing costs: 13
Interest Paid Under Current Monthly Payment Plan: $150,846.78
Interest Paid Under Refinance Monthly Payment Plan: $119,489.50
Interest Saved if Refinanced: $31357.2784595397
Net Refinancing Saves(Interest savings less closing cost): $29,457.28


If you refinance your current 4.5 % mortgage to a 3.5% mortgage, your monthly payment will decrease by $120.75 and you will save $31,357.28 in interest charges over the life of the mortgage. However, in order for this refinancing to yield any savings at all you will need to stay in your current home for at least 13 months. That's how long it will take for the monthly interest savings to offset the closing costs attributable to refinancing.

 

[DAGTA]

Is the above calculation including rolling those costs back into the mortgage? If so, it looks like you will come out ahead and this is a decent move. 13 * $120.75 = $1569.75. That calculation is based on $1569.75 being your total closing costs.

 

[IronWing]

You calcs are in the ballpark of what I came up with. I came in with 34k in savings but I didn't account for interest you've already paid on your existing loan so we're likely the same.

If you can pull off a 15yr (Wells Frago currently offering 3%) at $1350/month you can save $100k+ in interest.

 

[the DRIZZLE]

My mom says do NOT re-extend yourself for decades just to save a lousy 116 a month.

Irrelevant. You can always pay extra each month to get the equivalent term and you will save on interest.

 

[Binarycow]

refinance it for 15 years, cut back on monthly entertainment expenses to pay for the difference, get that lower interest rate and save 10s of thousands of dollars in the long run.

 

[shortylickens]

Irrelevant. You can always pay extra each month to get the equivalent term and you will save on interest.

When you pay extra it has to be split between principle and interest so no, not much. Not really.

 

[JD50]

When you pay extra it has to be split between principle and interest so no, not much. Not really.

What?

 

[JD50]

refinance it for 15 years, cut back on monthly entertainment expenses to pay for the difference, get that lower interest rate and save 10s of thousands of dollars in the long run.

Or you could just pay extra. It's a much safer move to pay off a 30 year loan in 15 years, then to tie yourself into a 15 year mortgage with a high monthly payment.

 

[Binarycow]

Or you could just pay extra. It's a much safer move to pay off a 30 year loan in 15 years, then to tie yourself into a 15 year mortgage with a high monthly payment.

that's true. However, do your homework fisrt and make sure you can deal with that extra expense monthly by cutting the financing period shorter. That, in some cases, can lower your APR by a whole point, 15 years compared to 30 years.

 

[drum]

i'm in the middle of a refi going from a 20 year at 5.25% to a 15 year at 2.87%
I don't have the final numbers yet but at worst i'm knocking 3 years off the mortgage and paying the same money per month

 

[EagleKeeper]

My fault, misread the length of the loan.

The extra year changes numbers slightly, but should not have an impact on decision. Most guides used to say that a percentage point is worth the refi if you have been in for less than half the loan time

 

[the DRIZZLE]

When you pay extra it has to be split between principle and interest so no, not much. Not really.

No, that is incorrect. All payments above the normal payment go toward principal. If you think about how amortization works you will realize what you posted makes no sense.

 

[Rastus]

As long as you aren't financing a car or vacation on the savings, go for it. If you are, you will suffer greatly.