To refinance or not to refinance

[nisryus]

Back in 2016 I bought the current house with a 30 yr mortgage at 3.5%. Then in 2017 I refinanced at 3% and changed the term to 15 years. The process fee was 2k. The monthly mortgage payment was up from %1920 to $2150.

Now that the rate is so low, I wonder if it is worth to refin again.. I still have 125k to go before paying it off. My bank is Flagstar and they told me it will charge me 3k for the refin.

 

[sdifox]

What is the mortgage rate you can get if you refinance?

 

[pete6032]

Probably not worth it but depends of course on the rate you could get and what the up front costs are.

 

[BoomerD]

You DON'T have to refinance with the same bank...just sayin...

However, $3000 in fees isn't terrible...have you figured out what the monthly savings would be? Then, compare that to, not only the refi fees...but the amount of extra interest you will pay over the life of the loan. It sounds like refinancing at this time might not make sense for your situation.

 

[dullard]

The rule of thumb is to refinance if (A) the interest rate drops by about 1% or more and (B) you will stay in the house long enough for the savings to outlast the refinancing cost.

A quick look at Bankrate.com and it shows that the typical 15-year fixed mortgage refinance is 2.5%. Assuming you just keep making the same monthly payments, then in order to break even, you'll have to live there for 6.9 years. If you do stay until the house is all paid off your total savings is about $830 (under $6 a month). The reward is pretty small. What if instead you moved after 3 years? Then you would have lost nearly $1500 (over $41/month). The potential loss is pretty large compared to the potential gain. I personally would not take that bet.

But, there was one mortgage at Bankrate.com that was 2.1%. In that case, your breakeven point was at 3.1 years, the total possible gain was $4642 (again assuming you just make the same monthly payments). If you are pretty confident that you'll stay in the house at least 3 more years and if you can get a mortgage rate near 2.1%, then it might be a good idea.

And like @BoomerD said, you aren't limited to one bank when shopping around. You might find lower refinance fees or lower rates, or both.

 

[nisryus]

Thanks guys. I am on the phone.. on hold now with the rep. Somehow the last time i called them they were not able to answer a lot of my question, like points.. etc. Seemed like they didn't actually want me to refinance..

 

[soulcougher73]

Thanks guys. I am on the phone.. on hold now with the rep. Somehow the last time i called them they were not able to answer a lot of my question, like points.. etc. Seemed like they didn't actually want me to refinance..

Your current bank probably doenst want you to as its interest lost to them I'm assuming? You'd be better off at another bank that wants your business.

I'm no mortgage expert though.