Author Topic: Refi or Not to Refi?  (Read 5123 times)

tannybrown

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Refi or Not to Refi?
« on: July 31, 2012, 12:03:12 PM »
I would like the forum's opinion again, this time on a refi possibility:

Current loan:
-$58k remaining (original loan of $104k)
-15 year fixed
-4.25%
-$901 total payment (w/taxes & insurance)
-Paying $2,800 additional towards principle every month...scheduled to have entire loan paid off in approx 16 months (Jan 1 2014)
-As the loan amount is small and the rate is fairly good, we do not get to deduct mortgage interest...still take the standard deduction

Possible refi:
-Same $58k loan
-10 year fixed
-2.875% locked today
-Approx $2k in total costs to close, including appraisal, underwriting, title insur., etc.
-Payment would go down only slightly...$100-$200 I believe
-Even more so here, we'd get no tax advantage from deducting interest.

So, ought we refi?  I also want to ask if, with the ridiculously low rate, if we ought to stop paying anything additional towards principle and just put that money into the stache.

Thanks so much for your advice!  We are first time homebuyers and would be first time re-fiers, so we are babes in the woods here.
« Last Edit: July 31, 2012, 12:06:53 PM by tannybrown »

gecko10x

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Re: Refi or Not to Refi?
« Reply #1 on: July 31, 2012, 12:10:54 PM »
If you are going to continue to pay it down aggressively, I would not bother with the refi.

However, if I were in your situation, I'd do the refi, then start investing the money instead.

RoseRelish

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Re: Refi or Not to Refi?
« Reply #2 on: July 31, 2012, 12:21:12 PM »
If you keep paying down the mortgage aggressively and do pay it off in 16 months, you're probably about the same by refinancing or not. The $2k cost to refi/16 months is $125/month - or in your $100-200 savings range. I'd skip the refi and avoid the headaches/fees.

grantmeaname

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Re: Refi or Not to Refi?
« Reply #3 on: July 31, 2012, 12:22:28 PM »
If you want to not pay it down and pay only the minimum, would you consider getting a 15-year or 30-year mortgage? Even the slightly higher rates of those two are basically free money after inflation, and very likely to be much less than market returns.

fiveoh

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Re: Refi or Not to Refi?
« Reply #4 on: July 31, 2012, 12:54:57 PM »
Do you mind sharing what bank you are using for your refi?  I'm trying to do mine and Bank of America just quoted me 3.5% on a 15 year. 

salmp01

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Re: Refi or Not to Refi?
« Reply #5 on: July 31, 2012, 01:01:05 PM »
Get a no cost refi.  If this lender won’t do it find one that will.  If your LTV is around 70% you should be able to get a 15 year no cost around 3% (provided you have good credit, income, etc). 

tannybrown

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Re: Refi or Not to Refi?
« Reply #6 on: July 31, 2012, 01:07:19 PM »
salmp01:  I have shopped for a no-cost refi and because the remaining balance is low ($58k) I have not found any takers.  In fact, these $2k in total closing costs are the best I've found so far.  If you have companies to recommend though, I'd definitely be interested in calling.
 
fiveoh: The lender is Prospect Mortgage and they are the refi affiliate of my current loan servicer.  877-837-0934

grantmeaname: I'd consider a 15 or 30 year mortgage but my guess is that, with much higher of a rate, the benefit of a refi of a loan already at 4.25% becomes less attractive.  If my interest only dropped to something like 3.5%, I wouldn't bite.
 
Widerhaken and gecko: I agree...it seems like the right move, if I refi, is to stop paying anything additional towards principle and bet that I can beat 2.875% in the market.  If I were to continue paying extra, then skip the refi altogether.

Again, thank you all for the comments (and keep them coming if there are more insights).  I'm continually humbled by the collective wisdom on these boards.

salmp01

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Re: Refi or Not to Refi?
« Reply #7 on: July 31, 2012, 01:16:18 PM »
Finding someone to do a no cost on a 58k balance may be a bit difficult (bad suggestion on my part).   If your goal is to aggressively pay this off you may want to explore a HELOC.  The rate is variable but if you’re going to pay it off in 16 months you should be able to save some money w/o paying any fees.   

Lars

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Re: Refi or Not to Refi?
« Reply #8 on: July 31, 2012, 01:32:50 PM »
As you consider whether to refinance or not (even no-cost refi), note that with your current loan and 16 month repayment plan you'll be paying less than $2000 dollars in interest before the loan is paid off.