Author Topic: Refinance Home Loan or Stay the Course  (Read 1957 times)

Wallerstein

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Refinance Home Loan or Stay the Course
« on: November 10, 2016, 11:07:52 AM »
Seven years ago I bought a home and financed $99,900 with a 30-year, 5.13% loan. The principal is $540/month. Total is $700/month with taxes & insurance. Now interest rates are lower and I can refinance it through my credit union at around 3% (paying refi fees of course).

Does it make more sense to refinance to a 15-year loan at 3% or just pay more each month on the current loan?

I could pay about $1000 extra a month on the current mortgage. My estimate is I would pay off the current mortgage in 5 years.

The only other high interest debt I have is $7000 remaining on an auto loan at 7%, which I could refi to 3.5% for the same remaining loan term period (2 years) saving me a couple hundred dollars in interest, or maybe even pay it off entirely using some emergency savings. 


frugaliknowit

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Re: Refinance Home Loan or Stay the Course
« Reply #1 on: November 10, 2016, 01:13:10 PM »
1.  You need to forecast how long you will own the property.
2.  With that in mind, you need to do a break even analysis once you know the closing costs.  You can get those from the lender.

soccerluvof4

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Re: Refinance Home Loan or Stay the Course
« Reply #2 on: November 10, 2016, 02:57:47 PM »
Yea..run the numbers and if you have the dicipline and want to pay it off sooner than thats what I would do. 3% is free money. Work it to your advantage but you gotta run all the numbers as the math doesnt lie. Some people dont mind a mortgage. I personally at any rate would get rid of as fast as I can. So hence I dont have one.

TomTX

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Re: Refinance Home Loan or Stay the Course
« Reply #3 on: November 10, 2016, 07:35:07 PM »
Another option is a Home Equity Loan or Line of Credit.

Typically those can be done with no closing costs - the interest rate won't be quite as low, but fuckloads better than what you have now.

At my CU, 15 year term:

Refi: 2.75%, $3,400 in closing costs
HEL: 3.75%, $0 in closing costs.

Don't just sit around paying over 5%.

Wallerstein

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Re: Refinance Home Loan or Stay the Course
« Reply #4 on: November 14, 2016, 06:48:32 AM »
@frugaliknowit/soccerluvof4: those are good points. I'll do the math and consider my options.

@TomTX: you figure if I got a HELOC on those kind of terms the finance math would work out to my advantage to pay off the car loan and then make monthly payments to the HELOC account?

TomTX

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Re: Refinance Home Loan or Stay the Course
« Reply #5 on: November 14, 2016, 01:00:06 PM »
I would probably refi everything into a single HEL or HELOC with zero closing costs.