Refinance home question

[KAYLI'S DAD]

We want to move in the next year or so but.

I know people say if you want to refinance your home you need to take in to account the fee's vs how much you will save for the break even point.
But what if your payment is going up because you are reducing your term?

Currently we are in a 30yr fixed with about 25 years left at 6%.
I want to refi at a 15yr at 4.5%
The payment will go up about $110 but the principal paid starting with the first month goes up about $250 more and gradually gets larger from day one.
So, I think it would be worth it because the principal will be reduced much quicker to out weigh it.

any thoughts?

 

[aka-mad4themouse]

Take a look at the amortization schedule for both loans to see where you will stand one year from now. I have a feeling that the lower interest rate will not make much of a difference in savings over the course of only a year's time. The re-fi fees will probably eat any savings up.

Instead, I would just begin throwing an extra $110 at the principal on the original mortgage.

 

[Mom2Ben02]

I would not refinance unless you are staying there at least three to five years. If I were you, I would take the money you would be paying extra on the loan, plus whatever you would be paying in closing costs, and put them on your current mortgage.

If you don't have significant cash reserves right now, work on building that instead. Most homes need a cash deposit put in escrow when you sign, so plan on having $2-5k ready to use.

 

[BrettS]

You need to consider how much the closing costs will be and how much you will be saving (on interest) each month. Closing costs will likely be several thousand dollars, so if you really plan to move in a year then you would have to be saving several hundred dollars a month in interest to make it worthwhile.

Your best bet would probably just to be putting an extra $110 (or however much you can afford) toward the prinicipal in your existing loan. Most loans will let you pay extra toward the principal every month. This would let you reduce the principal much quicker on your existing loan without paying any extra money in closing costs.

Again, though, this is based on your desire to move within the next year. If you were going to be in the house for another 4 or 5 years then it might make sense to refinance.

 

[ccgirl]

You mentioned that you would like to move next year. This makes me curious why you would refinance now. Why take 15 years off the loan if it is going to be paid off with a home sale? As other said, I would take the extra $$ and put it toward extra principle. You can take years off a mortgage by doing this as well. It's essentially your own "refinance". You could always keep the extra $$ in savings as well for a larger downpayment on your next home. Good luck with what ever you decide.

 

[KAYLI'S DAD]

We want to move in about a year. But I thought if something would happen where we cant for any reason then I thought the shorter term would be better to pay off quickly. Plus it pays the loan down fast.
I did the ammoritization table and paying the extra $110 on the current mortgage vs the refi is about a $2500 difference in 1 year. The 15 year would owe $2500 less but then again the fee's might be around that much.

 

[wdwfan16]

We want to move in about a year. But I thought if something would happen where we cant for any reason then I thought the shorter term would be better to pay off quickly. Plus it pays the loan down fast.
I did the ammoritization table and paying the extra $110 on the current mortgage vs the refi is about a $2500 difference in 1 year. The 15 year would owe $2500 less but then again the fee's might be around that much.

If you are definitely selling then I would not bother. If there is a possibility that you will not move in a year, then refi.

Would the extra $110 be a problem is you lost your job?

 

[Darcy03231]

I work in a law office that specializes in real estate closings. The general rule of thumb to refinance and recoup your costs is to go down at least 1% and be staying in the home for 3-5 years. Based on what you posted it would actually cost you more money to refinance and sell in a year than it would to keep paying on the current loan.

 

[jmpellet]

If you are planning to move in the next year, the 1.5% rate savings will not be worth the closing costs you would have to pay to refi. Just pay extra on the original loan. Or, if you are planning to move up in a big way, you might need the extra cash to put toward the new house??

 

[mommy2allyandaveri]

You might be able to call your mtg co and ask them "if I want to pay off my mtg 15 yrs from now what pmt do I need to be making?"

I know Wells does that and it would save you the money you would spend on the refi. The fees will probably be 2-3k overall I think.