How do you decide to refinance your home mortgage?

[sandgrace]

We all know that interest rates are at an all time low, and I read today that they may be dropping again this week. I'm wondering what factors go into refinancing your home mortgage. Does it matter if you plan to move in a couple years? How do you decide whether you should do it or not, and is the process a hassle?

 

[C_leen]

Hi-

The first time we remortgaged, we dropped from 8% to 6% 30 year. I remember someone came to our house to sign the papers, so it was pretty convenient. The second time, we were taking out money to remodel our kitchen. We realized houses were overpriced and it would be cheaper to just upgrade our kitchen and stay put. I think that mortgage was a 30 year at 5 or 5.5%. We did this one in early 2009. This time we had to provide a fair amount of paperwork and the house was appraised, but still nothing too onerous. We had to show up at the mortgage company and sign. DH did not make a realistic kitchen remodel budget, so then he got a home equity loan to finish the kitchen. This changed the whole feel of our house and the kitchen is now the beating heart of our home. It was worth it though we were sick to see the debt.

This past summer we remortgaged through our bank to a 15 year mortgage at less than 4% and rolled the home equity loan into it to get the debt PAID.

There are probably articles online that can help you determine what is in your best interests if you are planning to move. Best of luck to you!

 

[Pesky]

WE look at what it is changing and it needs to be a major change. The first time we refinanced it was over a point drop. Worth it. The next time, no fees and we dropped a little more and shaved 5 years off (down to 25 yr mortgage). Cool. Next time we dropped .75 plus shaved another 5 yrs off and got rid of the 2nd mortgage altogether, at no costs. So in 6 years we went from a 30 with a HELOC 2nd to a 20 yr at a substantially lower interest rate with more equity ownership. Not a bad deal. Rule of thumb is about a point difference. You also need to consider the costs of refi-ing.

 

[DawnM]

You need to run the numbers and see if it is worth it. We had to pay $500 to refinance. To us, that was a no-brainer as our interest went from 4.5% to 3.37% on a 15 year. It was going to save us $30K over the life of the loan.

Bankrate.com has some great calculators.

 

[deva]

You need to run the numbers and see if it is worth it. We had to pay $500 to refinance. To us, that was a no-brainer as our interest went from 4.5% to 3.37% on a 15 year. It was going to save us $30K over the life of the loan.

Bankrate.com has some great calculators.

DawnM has it right. You need to run calculators side by side to understand true total cash out. If you plan on paying off or moving within 5 years, definitely look into an adjustable rate mortgage. At my bank they are now at 2.19% for a 15 year. And I thought I got a good deal at 2.6 back in May!

 

[trish.]

We are in the process right now..why?

1. We plan to stay in our house forever. (It's prefect for us for a long time)
2. We were able to refi into a 15 year loan.
3. The monthly payment is only $167 more than what we were paying on the 30 year loan (I used to pay an additional $200 a month on the 30 year so really it's $367 more but it won't feel like it).