View Full Version : How to tell if refinancing is a good deal?
02-26-2003, 11:47 AM
Our bank just called to say we can lower our interest rate by 1% if we refinance -it's a 15 yr. loan. We would save about $76 per month, but we would have to pay $2070 in closing costs. We plan to stay here for a good long while, maybe forever. Any advice or web sites I can go to?
02-26-2003, 12:02 PM
www.eloan.com and www.bankrate.com are both good sites
Based on the numbers you gave, you need to be in your home another 27.2 months to break even.
We we toying with the idea of refinancing last fall, but were hesitant as we didn't know how long we would be here. We needed to live in our house for 2 years in order to break even at the new rate. Fortunately for us, we didn't refinance as we are relocating in a month. We checked out both site for all kinds of info and calculators.
One thing - you may find that going with a new lender, and not your present one, could be a better deal. That is if you don't have a prepayment penalty with your lender.
02-26-2003, 12:16 PM
We went from 7.5% to 5.25% - kept the same payment but went from 30 to 15 years. Closing costs were $3000, but we had to get a new title policy since we had been in the house for ~9 years.
The math does not always work out from a "payment' standpoint if your payment doesn't change much, but if you drop YEARS from the note - you will save $$$ - just common sense. Depends on balance and years left on note to determine worth of refinancing.
If the bank calls you - there is probably a better deal out there from another broker - a broker can look at numerous banks and find you a better deal.
Closing costs can be rolled into the loan, but then you pay them for 15 years.
I would do it again if I could get down to 4.25%.
02-26-2003, 12:44 PM
I just refinanced - today in fact.
I went from a 30 year 6.75% variable to a 15 year 5.25% fixed. Monthly payments are about $90 more per month, but the amount we save in interest by doing 15 years rather than 30 more than makes up for it. Another great thing is this is an assumable morgage (I didn't know what that was until the bank told me). Apparently whenever we sell, the buyers can "assume our morgage at it's current rate. That is a big plus! :D
Wow! It's been a long time since I've seen an assumable mortgage. That is a plus at such a good rate.
02-26-2003, 04:32 PM
The general rule of thumb is that if you can drop your rate by 2% it's a good deal.
(Right now I wish I had a higher rate thanks to Uncle Sam and the tax boogieman!)
02-26-2003, 06:46 PM
We just signed all the papers yesterday!!! We went from a 30 year 6.75% to a 15 year at 5.125% with a lower monthly payment since when we refinanced we also payed a nice chunk of the origonal loan off!!! Boy it does feel good. At least 15 years does not feel like "forever", and the mortgage will be paid off just as the kids start college.
02-26-2003, 08:04 PM
Since we have had a water claim on this house (which got me a new kitchen) we can't give this place away because someone else wouldn't be able to get insurance on it (oh,yeah - we're in Texas). An additional incentive to refi since we're definitely not going anywhere for 5 years (time it takes for claims to be erased).
02-26-2003, 10:25 PM
We just sent in our paperwork today! We're going from a 6.75% fixed 15 year to a 5.25% fixed 15 year, and we're doing what they called a 'streamlined refinance' meaning we're not adding any money to the loan, only refinancing what's owed on the house. Our payments are decreasing by about $150 per month! :D Our closing costs will be about $1400. We're actually saving about $500 in closing costs because we have a Home Equity Line Visa card. It's basically a home equity line of credit in the form of a Visa card. We bought DH's truck with it last year and paid $1440 in interest, but that interest was deductible on our taxes! Much better than the interest going to a bank. Our CPA told us that one of the best moves was a home equity Visa, because you save on closing costs for refinance, and YOU get the interest when you charge a purchase!
We were told several times that if you can save a half a point and you plan on staying in the house a minimum of five years, refinance. We're saving a point and a half, and with all the sweat I've put into my kitchen the past few months, I ain't leaving this house for at least 10 years! :rolleyes:
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