Author Topic: When to refinance  (Read 1627 times)

FastStache

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When to refinance
« on: January 12, 2015, 02:55:30 PM »
I got my mortgage in July '14 @ 4.375%. I have a PMI payment of about 100 bucks, and we did some upgrades to the house and were planning on a new appraisal, especially with housing prices steadily improving over here.

But, I have noticed interest rates dropping as well. At what point should I consider refinanacing, when interest rates go below 3.5%?

MNBen

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Re: When to refinance
« Reply #1 on: January 12, 2015, 03:57:25 PM »
Really there is a pretty simple answer for everyone, regardless of the size of the mortgage to at least get you started:
  • Do the legwork and find out what it would cost to refinance and how much you'd save in monthly payments.
  • Divide the amount it costs in total by the amount you save each month, to determine how many months it'll take until you break even.
If you can't guarantee you'll be in the house in that amount of time, then it's not worth refinancing.

Example:  Say it costs $4,000 to refinance and you save $75/month, well then that's 53+ months (4 years, 5 months) to break even.   That gives you a better idea if it's worth it.

Obviously there are other variables, such as I'm 5 years in and so have 25 years left, but I'd move to a 30-year payment, etc.  But the method above will give you a much better answer than any of us can.
 

OracleOfAtown

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Re: When to refinance
« Reply #2 on: January 12, 2015, 09:42:31 PM »
If you believe you have the 20% equity in the home to eliminate the PMI I would go for it. Is a 15 year out of the question cause rates are very low on those too? I did a refi through Costco through a mortgage company called Capwest it was dirt cheap and very easy. 

FastStache

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Re: When to refinance
« Reply #3 on: January 15, 2015, 09:32:57 AM »
I'm guessing even if PMI isn't eliminated, just getting a higher appraisal would cause it to go away sooner than later and lower the money wasted to PMI.