Author Topic: Mortgage Refinance Dilemma  (Read 3106 times)

nyshodog

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Mortgage Refinance Dilemma
« on: October 27, 2016, 07:58:42 AM »
Hello all! I'm new to the forum and thanks for taking on my question for me. so..

I currently have a 30y fixed mortgage at 4.625% with an outstanding balance of 198k with a payment of $1,082.

I recently went to the bank to refinance to a 20y fixed at 2.875% however the bank came back with an 83% LTV so they are adding on another 0.25% to bring the rate to 3.125% with a payment of $1,184 plus PMI of $26 for 19months. (It would of been $1,157 if the LTV was 80%) By the way the new loan amount is 211k because of the fees and such...

I would really like to get the interest rate on it down to the 2.875%... which now I need your help with..
I can do that with a principle payment of 7K, challenge my appraisal (which never seems to work), or just wait until I have paid down the principle to get me to the 80% LTV however I feel the rates will be increasing soon, or just bite the bullet and refinance at the 3.125%.

I think I know what I would do but I would like some opinions on it. Thanking you all in advance!!!

Jonathan
Future Retiree




bacchi

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Re: Mortgage Refinance Dilemma
« Reply #1 on: October 27, 2016, 08:50:27 AM »
Take the 3.125%. It's still way below the SWR and, when you hit 80% LTV, you can drop the $26 PMI. The $7000 you'd use to pay down the mortgage will give you almost 6 years of $100 payments and that's not including any growth. It's much better used at Vanguard.

scantee

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Re: Mortgage Refinance Dilemma
« Reply #2 on: October 27, 2016, 09:02:55 AM »
Doing a quick and dirty amortization calculation to compare the two loans it looks like it would be pretty much a wash in the long run.  You pay less over the life of the loan with the lower interest rate option, but you'll likely have higher earnings if you take the higher interest/PMI load and invest the $7k.

It's mostly up to your preferences: would you feel more comfortable with a slightly lower monthly payment or with investing the $7k already in your possession? I would choose the latter option, but I understand the appeal of the former because there is additional peace of mind in having a lower rate and lower monthly payment.

Option #1: $204k, 2.875%, 20 years
                = $268K
                + $7k principal
                - $14K savings from lower monthly payment invested at 6%
                = $261K in principal and interest over the life of the loan

Option #2: $211k, 3.125%, 20 years
                =$284K
                + $500 PMI
                 - $22K savings earned from investing $7k principal at 6%
                = $262.5K in principal and interest over the life of the loan


SKL-HOU

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Re: Mortgage Refinance Dilemma
« Reply #3 on: October 27, 2016, 10:23:27 AM »
13k for refinance sounds a lot. I thought they did no-cash out refinances without any fees. I guess the difference is you need the appraisal for the LTV. Even then 13k sounds too high.

jamesbond007

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Re: Mortgage Refinance Dilemma
« Reply #4 on: October 27, 2016, 10:26:42 AM »
13K more? Why? People are doing zero cost refinancing (When I say zero cost, I mean really zero. Nothing added to the loan or anything). I just did. Even the appraisal is paid by the lender. 13K seems excessive.

mozar

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Re: Mortgage Refinance Dilemma
« Reply #5 on: October 27, 2016, 11:51:37 AM »
From my experience I chose to put in $6000 when I refinanced.  I still regret it. and my refinance cost $1700.

Supernova_Jones

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Re: Mortgage Refinance Dilemma
« Reply #6 on: October 27, 2016, 02:26:57 PM »
What are some zero cost refinancers?

jamesbond007

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Re: Mortgage Refinance Dilemma
« Reply #7 on: October 27, 2016, 04:09:14 PM »
I did last month with CashCall Mortgage.

socalteacher

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Re: Mortgage Refinance Dilemma
« Reply #8 on: October 27, 2016, 05:50:04 PM »
I got three quotes from some local shops here in SoCal. We refinanced (1st payment in October) 315K at 2.5% with a cost of just under $900. I think you should shop around more. Rates have risen recently but that seems very expensive to me in fees.

nyshodog

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Re: Mortgage Refinance Dilemma
« Reply #9 on: October 27, 2016, 07:30:07 PM »
Thanks for all the response, much appreciated! I thought the closing costs were a little high but I thought all refinance loans have them and are normal...

Origination Charge of 1510 (app fee is 60m commit fee 1055, process fee 395)
Appraisal fee 375
Credit Report 28
Flood Certification 10
Settlement Agent Fee 750
Tax Service 76
Title Closer 30
Title Lender Coverage Prem 1087
Recorder fees 615
Transfer Taxes 1688
Initial Escrow Payment at closing 2877
Total $9562

It's a 20 year and it seems hard to find companies that do that. I would love to do a 15 year but just can't swing the payment.
Another fact I forgot to mention is I have 26 years left on the mortgage now, getting the 20 would cut interest and payments down by of course 6 years if that matters in the decision.

Can anyone recommend another refinance company that they used with a 20 year mortgage with a good rate and less closing costs??

Thank you guys. This forum is great.

Jonathan

Another Reader

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Re: Mortgage Refinance Dilemma
« Reply #10 on: October 27, 2016, 08:22:55 PM »
aimloan.com

jamesbond007

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Re: Mortgage Refinance Dilemma
« Reply #11 on: October 28, 2016, 11:47:47 AM »
Read this book: https://www.amazon.com/Homebuyers-Beware-Ripping---What-Mortgages-ebook/dp/B002MQ87ZU/ref=sr_1_fkmr0_1?ie=UTF8&qid=1477676825&sr=8-1-fkmr0&keywords=buyer+beware+mortgage

A $10 investment easily saved me at least $1000 in junk fees when I bought my house. Check if you local library has it.

Axecleaver

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Re: Mortgage Refinance Dilemma
« Reply #12 on: October 28, 2016, 01:00:59 PM »
Bender's line by line analysis is accurate. Closing Fees are way too high on that loan. Keep shopping around, and pay down your mortgage until you get to 80% LTV. The bank may include a "seasoning requirement" on the PMI, which locks you into paying for it for two years. So even if you paid it down quickly, you're still locked into PMI for two years on the new loan.

It looks like you're pretty close. ~8k to get to 80% LTV. How fast can you pay down your loan another 8k? Rates may go up in the future, but we're talking about a quarter point in the next six months. Not the end of the world.