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rated:
Good morning.

We've been our house for ~6yrs and looking to refinance as rates have dropped and there's no reason to continue to pay PMI. While there's several things I excel at, calculations on "Is it worth it?" and payback period aren't one of them.  My credit score is 800+ and no appreciable debt (cars paid off, no cable, $30 cell phones, no CC balance)

Current numbers:
Owe: 140k (purchased at 170k)
Current value: $220k + (Zillow says higher, home insurance says at least 220k)
Current rate: 4.875
Breakdown from mortgage statement (per mo) follows;
Principal: 333.00
Interest: 566.00 (ugh!)
Escrow: 500.00

Bankrate/Zillow  the following refiance rates that vary by day

20yr / 3.375% Rate/ ~$800 in fees
15yr / 2.75% / No fees

Not interested in resetting the clock to 30yrs, so I've left those rates off.

1) Can someone please give me an unbiased take on what the savings would look like?
2) Why do refinance calculators show a 'down payment' field? I don't plan on paying any lump sum/down payment when refinancing.
3) Considering doing 10k cash back, but the rates climb somewhat. Is this due to perceived risk?

Thanks in advance to any who have to time to assist...

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rated:
The 15 year option with no fees (assuming it is truly no fees --- not that fees will be added to principal) is a no brainer. The monthly payment would be ~950 (excluding escrow) which is just $51 more than the $899 you pay now.

ETA: Based on your numbers, it seems like you have little over 20 years left on the current mortgage. Your "savings" over the course of the mortgage would be a 15 year payoff vs. ~20 years that is left on your current mortgage (less the extra ~$51/mo you need to pay on the new mortgage). Works out to about $45k.

rated:
Logan71 said:   Current value: $220k + (Zillow says higher, home insurance says at least 220k)
 

  
On the insurance documents, is that "replacement value"? That's what they would pay to rebuild in case of total loss, not necessarily the market value (which may be more or less).
Logan71 said:   1) Can someone please give me an unbiased take on what the savings would look like?
2) Why do refinance calculators show a 'down payment' field? I don't plan on paying any lump sum/down payment when refinancing.
3) Considering doing 10k cash back, but the rates climb somewhat. Is this due to perceived risk?
 

  
1. That's pretty straightforward, just use a refinance calculator which compares your current mortgage to the quotes you're getting, like this one: https://www.zillow.com/mortgage-calculator/refinance-calculator/

"Current loan amount" should be the original principal, not the current amount remaining. "Monthly payment" the calculator presents is principal + interest, add your current escrow to that to compare the actual amount you'll be paying each month. Two things to be concerned about: Is the new payment affordable to you and how much money you are saving over the course of your loan.

You can also do it in Excel, but there's no reason to put the effort in with so many online tools available.

2. The two I looked at don't have this field. If they do, it's probably just because they converted a mortgage calculator and didn't bother to change that field. Wouldn't worry about it too much.

3. Not sure, but that sounds like as good a reason as any.
 

rated:
Logan71 said:   3) Considering doing 10k cash back, but the rates climb somewhat. Is this due to perceived risk?
 

 Assuming the house apprises for 220k, you should be well within 80% LTV even with a 10k cash out. Cash out refis generally have a slightly higher rate and that is perhaps what you are seeing.

With that said, unless you have a real good reason for the 10k cashout (e.g., strategic investment that can return far greater than the mortgage rate, paying off existing high rate debt etc.), do just a staright refi (no cash out).

rated:
Every time I see one of these threads, I hate living in the Northeast more and more.

rated:
vnuts21 said:   Every time I see one of these threads, I hate living in the Northeast more and more.
  I am not following you; what has this got to do with the Northeast?

rated:
fwuser12 said:   
vnuts21 said:   Every time I see one of these threads, I hate living in the Northeast more and more.
  I am not following you; what has this got to do with the Northeast?

  Homes in the northeast are far more expensive than 220K  

rated:
We just refinanced a couple of rental properties with good LTV at 3.75% with big credits back to cover all costs and load up the escrow accounts. This was with a zillow broker, lender was Provident. It took about 40 days to close, not a big deal, they had a 45 day lock.

So at a glance, 2.75 doesn't sound that great for a 15 year owner occupied loan. But I'm strongly inclined to keep my savings out of real estate, where it has very little utility or accessibility. Our new loans are 30 years, of course, with 'small' increases in the balance, and we're skipping a couple of payments.

Do you have well diversified savings elsewhere, maxing out tax advantaged savings every year? I'd still prefer to keep liquid money, but unless you're already well set in those areas, I don't think you can make a good rational argument in favor of aggressive mortgage payoff.

Remember that "no fees" can include a lot of expenses - appraisal, title insurance, closing services, local filing and taxes. Not to mention potentially needing to essentially pay a big chunk of taxes and insurance in advance.

rated:
Thanks for all the replies thus far. A few bullet points:

* I'm in Texas, and my total payment current is $1400 + an add'l $200 I put toward principal each month. I think things would be tight-er with a 15yr note, but I'm willing to try.
* Yes, we have 24 yrs left
* The 10k cash out would be for a back patio/rear door replacement. I'm weighing that against a 0% credit card instead, but waiting on right 'sign up now' bonus.

Dover - "Current loan amount" should be the original principal Thanks, I was plugging in remaining balance as the figure, thinking that I just need refi funds to cover what's left. And yes, I'm using replacement value, due to a recent "we noticed prices are up and adjusted your home insurance numbers to match" letter from Amica recently. Zillow numbers are Sky high, and I don't trust their guesstimates (65% increase in value since purchase)

rated:
Getting real cash out usually puts a higher rate on the entire balance. Do your quotes assume a cash-out loan? Be sure to check both ways to decide if you really want that or not. If only you had some liquid source of $10k and could go ahead with the replacement independently of credit card signup.

$200 * 12 * 6 = $14.4k

I get that paying down a mortgage is very satisfying and easy to track and predict. But you do seem to have an immediate example of a big hidden cost of doing so. If you find a non-cashout mortgage gets you a better rate, you might try getting that and following it up with a HELOC to access some of your equity. Rates for that should still be pretty good, and there should be plenty of no-cost options - often with the caveat that the line has to stay open for a couple of years, even if it has no balance. If you sell or refinance again before then, you may be on the hook for some HELOC costs like appraisal and credit reports.

rated:
Logan71 said:   Not interested in resetting the clock to 30yrs, so I've left those rates off.

I thought the "FWF way" was get the 30 yr but pay it like a 15 yr.

rated:
qcumber98 said:   
Logan71 said:   Not interested in resetting the clock to 30yrs, so I've left those rates off.

I thought the "FWF way" was get the 30 yr but pay it like a 15 yr.

  Only if cash flow might be an issue. If you know that you can pay it off in 15 years, you save a lot of money with the lower 15 year interest rate.

rated:
Logan71 said:   Dover - "Current loan amount" should be the original principal Thanks, I was plugging in remaining balance as the figure, thinking that I just need refi funds to cover what's left.
 

  
Yeah, it's really poorly worded on the site and I misunderstood at first, which is why I thought to mention it.

rated:
Thanks for all the relies. Dover, your Zillow calculator is much nicer than the one(s) I had been using.

Now it's down to weighing tax deductions, but I guess the common sense approach is just to assume that paying less interest overall is better than saying "Hey, I get to deduct this at tax time". It has proven to be an each way to push me to itemize, but no large loss if I have end up better off just taking the std deduction.

I appreciate all the help!

rated:
You're welcome.
Logan71 said:   paying less interest overall is better than saying "Hey, I get to deduct this at tax time".
 

  
You're absolutely right about that. If its the mortgage interest that makes the difference between standard and itemized then you're not really getting the deduct all of the interest, anyway.

rated:
You definitely should refinance. I would consider a different option for your 10k out though - such as a separate unsecured line of credit account. Since you are in Texas, I highly recommend Security Service Federal Credit Union. They will pay up to 5k in closing costs. We used them last year to refi our 15 to a 10, it was a painless, smooth, fairly quick process. Good luck.

rated:
raven2963 said:   You definitely should refinance. I would consider a different option for your 10k out though - such as a separate unsecured line of credit account. Since you are in Texas
  If you cash out refi the mortgage in texas, you get the higher cash out rates/fee structure plus if you refinance it will still be a cash out regardless of taking more cash out.  Plus there's additional stipulations on future refis after a cash-out in TX, such as needing to wait at least 12 months before any future refinance.

Since it's near the end of the year, if you had refinanced a month ago... you could have taken out ~$6k or so cash for free by rolling in the new escrow balance.  However, by the time it closes the new escrow will probably be very low as they'll probably have already paid this year's property taxes by the time the refinance closes.

You could always do a no-cost immediately at current rates and roll in the new escrow for a couple $k (or slightly negative cost, I was paid ~$1000 for a $160k refi a couple months ago.  The "costs" I'm referring to here is ALL third party costs plus lender fees minus lender credits.  Third party costs like title are very high in TX).  Then in a few months if rates are lower or even equal, you can do another negative cost refinance and effectively cash out the escrow again.

When you refi with escrow, you'll receive a check after closing from previous mortgage escrow and you can either bring in the cash for the new escrow or roll it into the new loan.  Rolling it in to the new loan is functionally equivalent to a "cash out" of the escrow funding amount.  Plus every refi you will also effectively "cash out" either 1 or 2 months times the mortgage payment amount because you get to "skip the payment(s) for 1 or 2 months".

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