Refi to VA loan or suck up higher rate?

[TrudgingAlong]

I'm hoping someone with more experience/mortgage know-how can help me reason this situation out: We bought our house in Jan. I didn't rate shop much because it was a cross-country move where we had no opportunity to house hunt before moving there (military move). We lived in a hotel for almost three months during the transition, have three kids, and speed was paramount. The housing market is very much a seller's market, too, so we avoided a VA loan (and in fact won our house over someone offering more with a VA loan because we had conventional financing).

End result, thought, is that despite our 800+ credit rating and lack of any debt, we have a 4.625 rate in a 200k mortgage (owe 198k on it today). I am looking possibly refinancing into a VA loan now (for the lower interest rate), but am not sure it's worth it. We are looking at loans with a 3.25 percentage, but with a 4k VA loan fee, plus 4k or so funding costs, it balloons the loan or requires a big chunk of money down. Aim.loan also has a couple options with 3.5 or a bit higher with less fees, but there is no avoiding the 4K VA fee. Refinancing into a conventional has higher rates, 4K or more fees for the best rates, and we definitely can't roll it into the balance because of how close it is to 80%.

Ugh. Is this worth it? We don't plan on moving anytime soon, and took this duty station because we knew he could most likely retire here in 5 years. We want our kids to finish school in one spot to make up for all the moving we've put them through.

[Sibley]

This is a situation where you should do the math. break out the excel spreadsheet, put together a basic amortization schedule, and play with it. Do everything you can think of, including leaving as is. Hard numbers have a way of clarifying decisions.

[TrudgingAlong]

This is a situation where you should do the math. break out the excel spreadsheet, put together a basic amortization schedule, and play with it. Do everything you can think of, including leaving as is. Hard numbers have a way of clarifying decisions.

I like this idea, but really have no idea how to set it up. I have played with several refi calculators, though. Original idea was to pay ahead with extra money (after fully making our investment funding goals each month) then recasting to bring the payment down when he retires in 5 years. I admit part of this is feeling like we were taken advantage of in the first place, which maybe is not a reason to refi.

[TrudgingAlong]

Oo, I found an amortization calculator online! Hadn't thought to look for that. Definitely helpful.

[Nords]

Instead of digging through the lending websites on your own, I'd suggest contacting a local mortgage broker.  They can search the national databases for legitimate offers as well as checking local banks and credit unions. 

Presumably you've already checked Navy Federal Credit Union.  I've had several very bad experiences with Pentagon Federal Credit Union and wouldn't recommend them, but maybe you'll find a good offer there-- if you can work through the lack of customer service.

The VA mortgage funding fee can be waived for vets with a disability rating:
http://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp
However you might be able to work into this exception:
"Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay."

In the case of an active-duty servicemember, it'd need to be something service-connected and documented in a medical record.  While it might make you eligible to waive the VA funding fee (and make the loan more attractive), that sort of disability rating might also adversely affect your spouse's fitness for duty.

[inline five]

I'm not VA but refi'd from 5.75 to 3.125 for no cost from 30 to 15 year term several years ago. Our monthly payment is $200 LESS despite cutting 15 years off the loan. I did have to ensure 80% LTV.

I would do whatever you can to refi to the lower rate and typically 15 year terms are another 0.5 pt lower than 30.

[TrudgingAlong]

Instead of digging through the lending websites on your own, I'd suggest contacting a local mortgage broker.  They can search the national databases for legitimate offers as well as checking local banks and credit unions. 

Presumably you've already checked Navy Federal Credit Union.  I've had several very bad experiences with Pentagon Federal Credit Union and wouldn't recommend them, but maybe you'll find a good offer there-- if you can work through the lack of customer service.

The VA mortgage funding fee can be waived for vets with a disability rating:
http://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp
However you might be able to work into this exception:
"Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay."

In the case of an active-duty servicemember, it'd need to be something service-connected and documented in a medical record.  While it might make you eligible to waive the VA funding fee (and make the loan more attractive), that sort of disability rating might also adversely affect your spouse's fitness for duty.

Navy Fed was exceptionally unhelpful on the phone, and offering the same rate, similar costs. The lady I talked to volunteered absolutely no useful information, and I got the feeling she had no desire to do any work she didn't have to. The guy I'm working with now did a lot of figuring for me, broke it all down on the phone, and actually seemed like he wanted my business. I was really surprised at the difference in service level.

My husband is still active duty and five years out from retirement. Had no idea you could agitate for a disability rating while still on active duty. I am thinking he'll qualify for one eventually, but he definitely doesn't want that kind of attention right now. Sure would be fantastic to avoid that 4K fee, though!

We've decided to go with it. Just ordered the appraisal. Mostly trying to decide if we should pay any of the costs, or roll it all into the mortgage. Even doing that, our payment will be $130 less a month, and we should break even at just over four years. I'd take the lender's credit and escrow refund and put it into our investments. Or we pay it all now, then pay our emergency fund back with the refunds. Decisions, decisions...