Refinance worth it?

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Topic Author
TBL_IA
Posts: 23
Joined: Sat Aug 04, 2018 6:02 am

Refinance worth it?

Post by TBL_IA »

Current Mortgage Information:

Rate - 4.375%
Balance - $115,995
Current Principal & Interest - $616.12
27 years left on mortage - 3 years in.

New Mortgage:
Rate - 3.25%
30 years

Home value - ~140k

No PMI due to VA Loan. It would cost approximately $2100 for a refinance.

I checked on Mtg Professor and it appears that refinancing would save money in the long run. I plan on being in the same place for atleast 18 more years. Just wanted to make sure this is correct.

Thank you.
Big Dog
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Joined: Mon Sep 07, 2015 4:12 pm

Re: Refinance worth it?

Post by Big Dog »

Instead of paying $2100 to close, I prefer so-called no-cost refis, which essentially roll the expenses into the rate. That way, if rates decline next year, you can refi again.

That being said, you'd have to forgo your VA benefit and refi at 80% conventional loan. If your home market is $140k, you'd need at least 20% equity, or a loan max of $112k. Try running thru some numbers in Mortgage Prof for a no-cost refi.
cuendillar
Posts: 29
Joined: Tue Mar 19, 2019 2:44 pm

Re: Refinance worth it?

Post by cuendillar »

VA benefit is usually able to be used again once the loan is paid off (full benefit) or charged off (pro-rated benefit) if that's what was meant by losing VA benefit.
Topic Author
TBL_IA
Posts: 23
Joined: Sat Aug 04, 2018 6:02 am

Re: Refinance worth it?

Post by TBL_IA »

Big Dog wrote: Thu Oct 24, 2019 11:06 am Instead of paying $2100 to close, I prefer so-called no-cost refis, which essentially roll the expenses into the rate. That way, if rates decline next year, you can refi again.

That being said, you'd have to forgo your VA benefit and refi at 80% conventional loan. If your home market is $140k, you'd need at least 20% equity, or a loan max of $112k. Try running thru some numbers in Mortgage Prof for a no-cost refi.
Thanks for the quick reply.

Not too familiar with refi's but the person who would do my refi mentioned "absorbing the fees in the loan" so nothing out of pocket. This is the same as you mentioned above as rolling expenses into the rate?

I looked up VA benefits and am able to use it again...sounds like the VA charges $600 without a disability rating? So the $1500 + $600 (VA).

Thanks for help.
Supurdueper
Posts: 98
Joined: Thu Aug 08, 2019 9:15 pm

Re: Refinance worth it?

Post by Supurdueper »

Seems like a no brainer to refi. You’re dropping 1% on a $100k loan. That’s saving at least $1k a year in interest. Even with the fees it’s less than a 2 year pay off, and you’ll be there 18 years.
Topic Author
TBL_IA
Posts: 23
Joined: Sat Aug 04, 2018 6:02 am

Re: Refinance worth it?

Post by TBL_IA »

Supurdueper wrote: Thu Oct 24, 2019 11:44 am Seems like a no brainer to refi. You’re dropping 1% on a $100k loan. That’s saving at least $1k a year in interest. Even with the fees it’s less than a 2 year pay off, and you’ll be there 18 years.
Thanks for the response.

Will get the application and the ball rolling.
dsmil
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Joined: Tue Sep 08, 2009 10:51 am

Re: Refinance worth it?

Post by dsmil »

I just refinanced to save .5 point, so yes, go for it. I rolled all of the closing costs (lender fees,title fees, escrow requirements) into the loan so I didn't have to bring anything to the table.
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CAsage
Posts: 2004
Joined: Sun Mar 27, 2016 6:25 pm

Re: Refinance worth it?

Post by CAsage »

TBL_IA wrote: Thu Oct 24, 2019 11:14 am Not too familiar with refi's but the person who would do my refi mentioned "absorbing the fees in the loan" so nothing out of pocket. This is the same as you mentioned above as rolling expenses into the rate?
Not the same thing. "absorbing the fees" generally means they will charge you whatever they come up with (and I've found refi fees to be very hard to pin down) and then add them to your new principal - hence, no out of pocket. Possibly out of shirt! The latter "rolling expenses into the rate" means the stated APR interest rate, which is the same as quoted rate for a no-cost refi, will generally be higher than the separately billed fees. Which one is better depends a lot on the exact details of which rate and what fees and how long. It's harder to get no-cost refi's on smaller loans because they don't have as much interest to make it up on.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
Topic Author
TBL_IA
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Re: Refinance worth it?

Post by TBL_IA »

CAsage wrote: Thu Oct 24, 2019 12:23 pm
TBL_IA wrote: Thu Oct 24, 2019 11:14 am Not too familiar with refi's but the person who would do my refi mentioned "absorbing the fees in the loan" so nothing out of pocket. This is the same as you mentioned above as rolling expenses into the rate?
Not the same thing. "absorbing the fees" generally means they will charge you whatever they come up with (and I've found refi fees to be very hard to pin down) and then add them to your new principal - hence, no out of pocket. Possibly out of shirt! The latter "rolling expenses into the rate" means the stated APR interest rate, which is the same as quoted rate for a no-cost refi, will generally be higher than the separately billed fees. Which one is better depends a lot on the exact details of which rate and what fees and how long. It's harder to get no-cost refi's on smaller loans because they don't have as much interest to make it up on.
Thank you for clarifying the difference between the two.

I will be sure to look at all the details before committing to anything.
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greg24
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Re: Refinance worth it?

Post by greg24 »

Have you considered making a $2100 principal payment?

Immediately reduce the amount owed, reduce your long term interest paid, and it is by far the easiest choice.

A refi resets your 30 year clock. A principal payment would keep your term at 27 years, and actually reduce the payment schedule so it'll be paid off months earlier.
Topic Author
TBL_IA
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Re: Refinance worth it?

Post by TBL_IA »

greg24 wrote: Thu Oct 24, 2019 12:58 pm Have you considered making a $2100 principal payment?

Immediately reduce the amount owed, reduce your long term interest paid, and it is by far the easiest choice.

A refi resets your 30 year clock. A principal payment would keep your term at 27 years, and actually reduce the payment schedule so it'll be paid off months earlier.
I have not considered a large single principal payment. I have thought about making extra payments to pay it off sooner.

When I input the #'s into mtg professor, I would save around 16k in 18 years.

Just trying to figure out what the best decision would be.
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CAsage
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Re: Refinance worth it?

Post by CAsage »

It comes down to a basic "Present value" problem. Yes, it would be wise to shorten the term of any new hypothetical refinance by making the payments on the same 27-year term (i.e. refinance for a 30 year term, but pay $550 monthly). Making some assumptions about the exact balance, assuming you have 27 years (324 months to go....), dropping the rate from 4.375 to 3.25% does seem worthwhile. It might be hard to get a better loan or a no-fee loan with that balance.

Current: Proposed:
PV $117,000 $119,100
Term (months) 324 324
Rate 4.38% 3.25%
Pmt: ($616.02) ($552.63)

PV: $136,681 $122,616
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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