Discussion in 'Budget Board' started by castleview, May 17, 2010.
If I'm at 5.65 for a 20 yr. loan, should I be refinancing?
I don't know that there's a definitive yes or no answer to that question. It's likely that you could get a lower interest rate right now, but probably not significantly lower and it will cost you money to refinance because there will be closing costs... often $1000 or more in closing costs.
In order to figure out whether it makes sense you first need to figure out how long you plan to stay in your house. If you'll only be there for another year or two then you'll probably pay more in closing costs than you'd save in lowering your interest rate and it's not worth it. If you think you'll be there for 10 or 15 years then it probably makes sense as you'll easily make up the closing costs in interest savings.
If it's somewhere in the middle then your best bet would be to talk to a few banks and find out what your interest rate would be and how much the closing costs are and then just do the math. For example, if it will cost you $1500 in closing costs and you'll be saving $50 per month then it will take you $1500/$50 or 30 months to make up the closing costs... after that you'll be saving money. But you won't be able to do that math until you know exactly what the numbers are.
You can probably get a rate in the 4.25 - 4/5 % range for 15 yr now... what you might want to do is go out to any banks website and go to their mortgage calculator. You know what you're paying now, so just type in what you owe left, how many years you'll do the mortage for , and the new rate. ( any bank can tell you what their rates are today) Once you have that, then compare what you'd be paying in interest if you kept your current mortgage and what the total interest would be on the new mortgage.
3 things to keep in mind.....refinancing is great if you plan to stay in your house at least 5 -7 years. Another, it's good if you can go at least 1% - 1 1/2% less than what you're paying now. The third thing...find out what you'll be charged to refinance....you don't want to have to pay points or pay a huge refinance fee. Our bank refinanced ours for like $ 1300 because they wanted to keep our loan. So they cut their fees. It's worth shopping around.
We had 5.65% (30 year mortgage) and refinanced for 4.75% ( 15 year mortgage). We found that we would save $ 75,000 in interest. So yes, it was worth it. You just have to see for your personal situation if it's worth it.
But I would go out to MSN money, Wells Fargo.....get ideas of today's rates and use the mortgage calculators. Sometimes it's very much worth doing. Good luck !!
Try www.bankrate.com They have a lot of useful calculators. This is their refinance calculator http://www.bankrate.com/calculators/mortgages/refinance-calculator.aspx that will help. Also try the amortization calculator to see exactly how adding extra money every month will save a bundle. Good luck!
As some of the others have said, it really depends.
If you're at the tail end of a 20 year loan, then no. If you're at the beginning, then it's more likely a good idea.
Also, are you needing to reduce your payment, or just want to pay less interest? Are you able to go into a shorter term loan and pay a higher monthly payment?
Our credit union, for example, if offering 4.5% for a 12 year loan refi. No points, TOTAL cost is $350. For an 8 year loan it's 4.25%. See if you can find a no or low closing cost option if you decide to do it.
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