You are correct about the extra year being a drag.Inframan4712 wrote: ↑Sat Jun 05, 2021 6:29 amI am quoting you, BB, because I'd like your thoughts on my concern about serial refinancing. I've certainly benefited from this thread and your contributions as well.BrandonBogle wrote: ↑Fri Jun 04, 2021 8:48 amOnly that the rate table is not linear. For instance, lurkman has a $3,430 pricing improvement moving up 0.125%. If went up another 0.125% to 2.125%, maybe the pricing would only have improved $1k.OrangeKiwi wrote: ↑Fri Jun 04, 2021 8:33 amPoints are a trade off between money now versus money in the future. I assume the lender knows what they are doing more often than not, and I am worse than the lender at pricing money now vs money in the future. Therefore, I assume I am better off with no points and investing any cash I may have used to buy points in VTI.lurkman wrote: ↑Fri Jun 04, 2021 8:27 am P.S. The rate table also offered 2% with about $2750 in credits; we paid a small amount ($680) in points to lower the rate to 1.875%. This turned out to be a sub-optimal choice because the rates fell the evening after we closed. Now Better is offering 1.875% (15 yr) with zero points.
I am interested to know if my theory has any holes.
When I have them compete, I sometime does so at a rate with points. Better is particularly easy to work with this way. I had them pricematch a 1.875% offer from Bankrate, then picked a higher rate instead. The offer at that higher rate was more expensive to me, but I knew I was far off from the sweet spot in pricing my loan and I would save more switching rates after.
Background: Refinanced 7/2020 from a 4% 30 year to 2.5% 15 year for $350k, <80% LTV. This was better than no-cost, netted me about $500 after lender credits.
I've been watching closely for the last year, and a month ago started the process with Better. But stopped very quickly precisely because Better is so good at showing your different rate options and your break-even period. It's not the break-even period that has me concerned.
It's the extra year of payments.
My current loan has 14 years left at $2321 per month, principal and interest. Better is offering a no-cost refi at 2.25%, which is 0.25% lower than my current rate, payment $2185 per month, saving me $136 per month for 15 years. If I multiply $136 x 12 x 15 I get $24,480, the total savings over the loan period. Or maybe it should only be 14 years. But that's splitting hairs. The real problem is that I have an extra year of payments, which is $26,220.
$26,220-24,480 = 1740
So lowering my rate costs me money. I also don't get as much of a tax deduction.
What am I missing?
Pay the new loan at your current payment of $2,321/month and it will be paid off in less than 14 years