Is it a good idea to refinance a mortgage?

[2cutekids]

Since the interest rate is probably as low as it will go, is anyone else thinking about refinancing their home loan?

 

[Karenj2]

I'm no financial guru, but what I've heard is that you should only refinance if the rate is more than a 2% difference, because you might have to pay for closing costs, etc. when you refinance.

DH and I did that back in 2004(?) when the rates were also good, so our current rate is 5.5% on a 20 year loan. (We had previously had 2 mortgages - a 30 year fixed and a PMI loan.)

But otherwise, I'd say it can't hurt to check!

 

[MrsTao]

I work for customer service in a VERY large Nationally known bank. I say this that use to be the case of the 2%. This is no longer the case. If you are looking for cash out look at what your current rate is compared to what you may go up to. Then look at what a Home equity loan is going for. Do some debt consolidation to get lower rates on those pesky credit cards. Why pay 12- 30% & you get no tax benefit. If you do a HELOC you can roll everything together and even save money in the long run. You also have a Tax benefit like your 1st mortgage.
Getting back to the original question.... call your mortgage company ask if you qualify for a steamline or 3 step also a "No closing cost" refinance. Usually you pay nothing out of pocket nor points or closing costs... yes the downside is usually the rate is about .25% higher. For me I can handle that more so than 5K out of pocket. Please feel free to email me privately with any other questions. I AM NOT A LOAN OFFICER!!!

 

[makelab]

i would say if it saves you money in the long run (less interest paid over life of loan), and you have the cash to do it, i would do it. make sure you do a proper comparison.
example, if you started a 30 year loan 3 years ago, you would compare only 27 years of interest to the new loan you are considering.
i calculated how many payments i had left, multiplied, and subtracted the principal balance.
of course, if you go to a shorter term, it is almost always less. the payments may be higher, but if you can handle them, you come out ahead in the end.
get a good lock, too. good banks will have a free 30-60 day lock. give yourself enough time to gather paperwork, and complete the process.

 

[HaleyB]

2% is a guideline.

The way I decide is this:
Figure out what your new payment will be.
Subtract that from your old payment.

Divide that number into your costs. This tells you how many months until you break even. You are looking to break even in less than 2 years, normally.

However this will not take into account length of loan. That is only an issue if you will be living (or may be) in your house long enough to see the end of the loan you currently have. If not, it really shouldn't matter to you.

However if it is your forever house it matters very much. You then have to decide if you want to add years to your loan in order to save some money now. Another option is to look at 15 year loans.

Of course if you are in an adjustable it is another ball game entirely.

 

[2cutekids]

Thanks for all the helpful info! With the price of EVERYTHING going up, we're looking at ways to make our expenses go DOWN!

 

[Sheaboys]

We just did this. We had refinanced in 2005, had a great rate of 5.68% for a 30-year mortage. We had taken out an equity line of credit with it. So the equity line was at $11,500, the mortgage was $97,000 (give or take) and another 2 credit cards equalling $8,600 total. So we added that all together and took out a loan for $127,500 (keep in mind we only paid $114,900 for the house orginally). We took out a 15 yr loan at 4.65%, and we are paying the same monthly that we did with all of those bills together. We paid off all our debt with it, and we will have the house paid off in 15 yrs max. but we pay bi-weekly so that would be about 12.5yrs or so. And if need be, we have a ton of equity in the house should we need cash out ($230,000 is what it was appraised at).

We did it through lendingtree, orginally we went in thinking we would save money on just doing another 30yr for what we owed on the house, but we had a great guy who gave us tons of scenarios and helped with our decision.

 

[MrsPete]

2% is a guideline.

The way I decide is this:
Figure out what your new payment will be.
Subtract that from your old payment.

Divide that number into your costs. This tells you how many months until you break even. You are looking to break even in less than 2 years, normally.

This makes perfect sense to me. Refinancing will cost you something --figure out what that something is, then figure up how many months it'll take you to start "saving" money with the lower interest rate. How long do you intend to stay in your house? If you're going to be there only a couple years, you may not see enough savings to justify the effort. On the other hand, if you're there for the long haul, then it could be worthwhile.

Thanks for all the helpful info! With the price of EVERYTHING going up, we're looking at ways to make our expenses go DOWN!

Well, sometimes and sometimes not. There's making expenses go down today, and there's making expenses go down in the long run. It's not a bargain if you lower your payment today but add years to the mortgage in the long run.