Should I Refinance?

[Fenway]

Good Day.  My first post.  How exciting. 

I bought a house 3 years ago and took out a 30 year mortgage at 5.25%.  I make an extra payment each year (with bi-weekly payments - 26 weeks).  So that will take about 4-5 years off my mortgage.

My question is, should I refinance?  Do you think 5.25% is high?  Is it worth refinancing (at say, 4%)?  Will I save a lot of money?  Do think I will be able to refinance at 15 or 20 years and still have approximately the same monthly payment?

To put this all into perspective, I am 47 years old.  I plan on working till I'm 67.

Any thoughts?  Ideas?  Suggestions?

Be kind.  I don't have thick skin.

Thank you!

[twinge]

I would definitely refinance. You can get a no-cost refinancing and still beat your current rate by 1.5-2.25% depending on your credit and term of loan--which means you could shorten the term of your loan without increasing your payment.  There's all sorts of on-line calculators that you can plug in the specifics and find out exactly--if you just search refinance calculator.

[Will]

I am far from an expert, but I have started looking into this just today for myself.  About 2 years ago we got a mortgage at 5.25%.  A mortgage broker around here posted that the rates for 15 year mortgages are at 2.75%.  Using a couple of online mortgage calculators, our payments were estimated to change by less than $200/month.  And we'd be mortgage-free in 15 years (or less).  So I would say "Yes."
Go for it!

[tannybrown]

Without knowing the specifics of the mortgage and any refi costs, it's hard to say, but here's the back of the envelope math:

-For every 1% in lower interest on every $100k of mortgage owed, you'd save approx $1k a year.

-Supposing you had $3k in closing costs, and a $150k mortgage, lowering it by 1%...you'd be saving $1.5k a year, and you'd break even after 2 years.

-Unless you're moving fairly soon, or unless you're paying your mortgage off very soon, I'd say it's time to refi....but you'll have to run the numbers to be sure.

[Another Reader]

You should definitely refinance.  As long as you have 20 percent equity and good credit, you should be able to get a 30 year loan in the 3.5 to 3.625 percent range today with a one percent origination fee if you shop carefully.  A fifteen year mortgage would be less than 3 percent with the same origination fee.  Be sure to get some references for brokers and shop the rates and terms among them and some local lenders.

Use the on-line mortgage calculators described in other replies, but I think your payment will not be much different for a 15 year loan with your current balance than your current payment on the 30 year loan with a higher original principal.  A "no cost" refi (no origination fee and closing costs paid by the lender) will have a higher rate.  It's a no brainer, unless the lower interest rate over the full term of the loan is more attractive.

If you have less than 20 percent equity and/or blemished credit, the rate and terms will be less favorable.  It's still worth investigating.

[velocistar237]

Here's a calculator that will tell you what you could save by refinancing.

http://www.mtgprofessor.com/calculators/Calculator3a.html

[Secret Stache]

Do it.  I just refinanced from a 5.5% to a 3.3% with no closing costs.  I had to pay $400 for the appraisal and that was it.  I could have gotten as low as 2.6% but would have to have paid closing costs.  The deals are incredible! I could have gone from a 30 to a 15 with the same payment or from a 30 to a 10 yr by increasing my payment by a couple hundred bucks.

[Will]

Do it.  I just refinanced from a 5.5% to a 3.3% with no closing costs.  I had to pay $400 for the appraisal and that was it.  I could have gotten as low as 2.6% but would have to have paid closing costs.  The deals are incredible! I could have gone from a 30 to a 15 with the same payment or from a 30 to a 10 yr by increasing my payment by a couple hundred bucks.

So you stuck with a 30 year then?  How much did your payments drop?

[Fenway]

Thank you folks!  I'm even more excited now to refinance!  I'll keep you posted.  I'm sure I'll have more questions.  Y'all rock!

[jrhampt]

Hmm.  We refinanced about a year and a half ago from a 30-year at 5% to a 15-year at 3.65%.  Are 15-years really substantially lower now to the point that it might make sense to refi yet again?

[Another Reader]

15 year rates are in the mid-high two's right now.  The broker I have used in the past e-mailed me this AM with a 30 year fixed offer at 3.375 with 1/8 point origination.   Anytime you can reduce your rate one percent, it's worth having a serious look.

[Guitarguy]

Hmm.  We refinanced about a year and a half ago from a 30-year at 5% to a 15-year at 3.65%.  Are 15-years really substantially lower now to the point that it might make sense to refi yet again?

I've seen some 15 yr refis in the 2's the past few weeks, so yes. Make sure there aren't any substantial, up-front costs when you do it.