Poll

Should I re-fi now or wait?

Do it now.
8 (66.7%)
Rates will drop more; wait.
4 (33.3%)

Total Members Voted: 12

Author Topic: Mortgage Rates and QE3  (Read 1698 times)

jrhampt

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Mortgage Rates and QE3
« on: September 17, 2012, 08:09:37 AM »
As most of you probably know, the Fed's announcement last week had the effect of further lowering mortgage rates.  We had been trying to do a no-cost refi at 3% for a 15 year fixed back in August, but our appraisal came back low, and we would have had to pay PMI, so we decided not to do it.  I called up my bank today to see what they were offering now in terms of a loan modification (similar to a re-fi in some ways, but different in others - most notably, there's no appraisal, very minimal paperwork, and the clock on the loan does not reset - you just pay a 1.25% fee based on the amount of principal remaining, and you get the lower interest rate).  Currently we have a balance of $210k remaining on our loan, and it is a 15-year fixed at 3.625%.  Our last re-fi was almost 2 years ago, and at our current rate of payment, we'd have it paid off in about 11 more years.  This loan modification would get us down to 2.875%, at a cost of about $2600, and reduce our interest paid by around $110 the first month, or $15k over the life of the loan if we stuck to the required payments.  I am wondering whether I should wait to see if rates drop further, or just go for it now?  I think that rates could drop to 2.5% realistically at some point, but it is of course worth more to re-fi earlier on in the life of a loan.  What would you do? 
« Last Edit: September 17, 2012, 08:14:53 AM by jrhampt »

AJ

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Re: Mortgage Rates and QE3
« Reply #1 on: September 17, 2012, 12:04:24 PM »
Do you think you'll pay it off on schedule, or do you plan to accelerate your payments? If there is a good chance you'll stay there the full 11 years, and you don't plan to pay it off early, I would go ahead and do it now. Even if rates drop, the difference between 2.5% and 2.875% is really small for the risk you are taking by waiting. After all, they could go up just as easily.

jrhampt

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Re: Mortgage Rates and QE3
« Reply #2 on: September 17, 2012, 02:35:45 PM »
I think we'll be here at least another 5 years before we'd consider moving to downsize, but we have been putting an extra couple hundred dollars a month toward principal.  Nothing huge, but it will speed up the payments a bit.  We may stop putting extra toward it if we lock in the lower rate, though.  It's getting to the point where even muni bonds are returning about as much.