Posted on 12/17/2008 12:05:24 PM PST by brownsfan
I have a home with a 30 year loan, I owe about 93k on it. At the current rate I'm paying it, I'll have it paid off in slightly over 12 years. My current rate is 5.75.
I called about a refinance. 4.875 with $2300 in closing costs. This would drop my payment about $150/month. So, if I kept paying at the same payment I pay now, I'd pay the new loan off in slightly less than 12 years and save about $8k in interest payments over the life of the loan.
I don't plan on moving. I'm 51. I can't see any reason I shouldn't do this, but I thought I'd get some input here. Thanks.
“I think I’d wait. I believe rates will go lower and they’ll be begging people to rewrite loans for a fee.”
Do you have a time frame where you’d expect further drops?
That 2 percent thingy applied when mortgages were 8 to 10 %. If you go from 5.75 to 3.75, that’s a 35% decrease in interest costs. That is the same percentage if your rate were to go from 10% to 6.75%. Who wouldn’t jump on that one?
If the payout (savings in interest costs) pays for the refi costs in 3 years or so, it is found money.
There were 5 million loans made to illegals, also.
Barney Frank et al made sure that the system was rigged so that asking for ID was illegal.
He is a maggot and the people of Brookline contunue to re-elect him.
“I was told, however, that the rule of thumb is get a loan that’s 2 points lower than what you have now, which for you and I would be 3.75%.....?”
I have been told the same thing. But the numbers don’t lie. The only thing that would mess up my plan is if for some unforseen reason, I’d move. But if I stay, and pay it off, I’d save $8k.
Oh, and a shorter term... 15 years or less if you can handle the payment will save you a LOT of money in the long run.
Did you take a look at the 15 year rate? You should be able to get that even cheaper - 1/4 or 1/2%.
Huh? 6 months ago I was getting 10 calls a week from lenders begging me to cash out my equity. No fees, below market rates, 125% to value, etc. I realize that things have changed but to state there is no loan-to-value or liquidity is just not correct.
Secondly, where does one find anything yielding 8.27% after tax, 12.7% at marginal rate of 35%, now that Madoff is going to prison?
“Set up a small cash reserve in a savings account. Place the extra cash-out into an Indexed Universal Life Insurance program making a non-taxable gain of about 8.27% with a 167 year old insurance company with 1.,59-1 asset to piolicy ratio.”
This sounds suspiciously familiar. I had a Prudential life insurance policy. They talked me into buying a second policy with the earnings of the first.
Churning I believe it was called. The class action settlement wasn’t very much.
If your current lender is not interested in a low or no upfront cost refi, it may be that they’re heavily relying on the fees to make a profit. Regardless, if they’re not willing to do it, then they’re not.
Go look around on bankrate.com. I recall a 15 year at 4.75% from last week. Some of them have fees that are considerably lower than what you quoted.
You have very healthy equity in the property. Is it in a market with heavy downside pressure on resale value of late, moderate declines, or reasonably stable? If you’re in a former bubble area, I’ve heard of 30% equity required for refi, on a current appraisal.
This is investing equity from your house. You borrow at 4 and make 8. And you have death penalty. As far as I know (my wizard is out shopping) Prudential doens' sell that program.
“First, the closing costs sound high. Second, be very certain you will maintain the discipline to keep paying the amount you are paying on your current mortgage...”
Sounds high to me too, but the published closing costs of various banks in the area are the same or higher.
The discipline is not a problem. My current loan is a 30yr. I’ve had it for 4 years. If I were paying the minimum, refinance wouldn’t make sense. I am paying my 30 year as if it were a 15 year, but I like having the flexiblity to pay less, should the need arise.
Old Mutual is averaging 8.27% tax free over the last 25 years. It was 9.6 but they just adjusted down because of this years record. There is a guarantee of 1% so when the market goes down, your gain is 1%. It's agood way to build retirement.
There is no loss of principle and they have out run the S&P index the last 25 years.
LOL! ..... death benefit. Everyone knows there’s no death penalty in Cal.
“Oh, and a shorter term... 15 years or less if you can handle the payment will save you a LOT of money in the long run.”
If I refinance, I’ll continue to make my current payment. So, if my payment is $1000/month, and I refinance such that my payment is $800, I’ll still pay $1000. That’s the only way this would work in my favor.
The bank that currently has my loan quoted me 4.875 regardless of term. I never heard that before.
Make sure there are no fees bundled in. My guess is you could get lower but with no fees they are giving you 4.875%. Make sure there are no doc stamps with your county or recording fees.
$40,000 at 5.1% is almost not worth it unless you can get maybe around 4.375% with no fees. Her advice to wait is probably good.
To the original poster - 4.875% in the current environment is not a great deal on a 30 year. I refied about $150,000 4 years ago or so at 4.75% on a 15 year.
If you take 100,000 in equity and invest it in a safe liquid program you can pay the 100,000 off in 12 years instead of 15 and still have a 100,000 left in the fund, plus a death benefit.
I’d negotiate with them over the closing costs.
If they could refi to 4.5% with no cc I’d go for it-
assuming the loan you have and will get has NO prepayment penalty. Get a number at the bank to call to check on the rates daily and a way to lock in and keep shopping around.
And get even more gazelle intense about paying off your mortgage. It sounds very do-able.
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These days, you won't get the best rate unless you are going 60% loan to value or less.
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