Should we refinance our house or not? Really need advice

[LoveBWVVBR]

I'll keep it as simple as I can. We are almost 3 years into a 30 year loan at 4.675%. We currently have a rate lock of 3.75% on a 15 year loan. We have until this coming Friday to submit everything that they asked for if we are going ahead with this. The closing costs are about $3300. Our payment would go up $300/month, but of course the term is shorter.

Sounds like a no-brainer, BUT...it is likely that we will move in the next 5 years. Our elementary schools here are great, but the Jr. High and high school are not. DH wants to move a few towns north where our kids would go to much better Jr. High and High Schools. We are not doing that this minute because 1) we like where we live 2) our elementary school is good and 3) school rezoning has been going on in the town where we would move and we'd like to see that shake out before choosing a neighborhood...don't want to have to move twice, KWIM? We owe probably 1/3 of what our house is worth, so we are not upside down or anything. Our currently payment is quite low. I am just not sure about paying $3300 in closing costs to do this...is there any good reason to refinance or should we just sit tight knowing that we will likely move?

 

[Karlzmom]

Is there a reason you don't just add the $300 a month to your payment? Add the $3300 in closing costs as a lump payments....check out a mortgage calculator, you may find you will be close to a 15 year term without any concern of the possible move....

 

[Alexander]

Is there a reason you don't just add the $300 a month to your payment? Add the $3300 in closing costs as a lump payments....check out a mortgage calculator, you may find you will be close to a 15 year term without any concern of the possible move....

This is a GREAT idea!

 

[ICF]

I'd never pay $3300 in closing costs....that's nuts.

 

[LoveBWVVBR]

I'd never pay $3300 in closing costs....that's nuts.

There is just no choice if we want to refinance. That is a GOOD deal from our credit union. Wells Fargo where we have our loan now wanted a lot more than that. We do not qualify for HARP2 or any other program that would allow us to refinance for low or no closing costs.

 

[LoveBWVVBR]

Is there a reason you don't just add the $300 a month to your payment? Add the $3300 in closing costs as a lump payments....check out a mortgage calculator, you may find you will be close to a 15 year term without any concern of the possible move....

Really? I am going to check this out now. There is about a point difference in the interest rates though???

 

[lvillotta1]

I had no closing costs at the bank I went through. My interest rate is around 3% for 15 years. My payment went up $30 a month. I have 13 years left and will have no house payment by the time I am 55. I would not refinance at all.not a good move if you are leaving that house in 5 years. Like another person said add $300 month toward principal a month. Your closing costs are crazy. Save your money.

 

[Marionnette]

Really? I am going to check this out now. There is about a point difference in the interest rates though???

Bankrate.com has very good mortgage calculators.

Hypothetically speaking, let's just say that you owe an even $100K on your home with exactly 324 months (27 years) left on the 4.675% mortgage and you paid an extra $300/month on the principle from now until July 2018.

You would pay $19,992.61 in interest over the 5-year period.​

Now let's say that you were to refinance that $100K to a 15-year mortgage at 3.75%. Your monthly payments increase, so you don't pay anything extra on the principle.

In 5 years, you would pay $16,311.08 in interest.​

The difference between those two amounts would be $3681.53. Once you factored in the closing costs of $3300, you would save yourself a total of about $380 over the course of 5 years.

But here's something you really need to consider. The balance owed at the end of 5 years.

Keeping the current mortgage and paying $300/month extra: $69,359.12
Refinancing with no extra payments: $72,677.73​

Of course, these numbers only apply to someone who is financing $100K. If you were to finance more or less than that amount, it will sway the numbers accordingly. So, go to bankrate.com and use their mortgage calculator with your own numbers. Check the amortization schedule for July 2018 for both mortgages to see which one will give you the better deal.

 

[MomToOne]

I had no closing costs at the bank I went through. My interest rate is around 3% for 15 years. My payment went up $30 a month. I have 13 years left and will have no house payment by the time I am 55. I would not refinance at all.not a good move if you are leaving that house in 5 years. Like another person said add $300 month toward principal a month. Your closing costs are crazy. Save your money.

Did you truly have no closing costs, or did you just have nothing due at closing? Those are very different things. Most cases where people say they got a "no closing cost" loan the costs were there, the mortgage company just rolled them into the loan balance.

Another way mortgage companys sometimes "hide" closing costs is to charge a higher interest rate for a no-cost loan vs. a loan with closing costs. But then again, the costs are there, they just hid them.

Here is an article that discusses all this: http://www.forbes.com/sites/moneybuilder/2012/03/28/the-no-cost-refinancing-myth/

$3300 is not outrageous for closing costs.

 

[BABY_EINSTEIN'S_MOM]

We just closed on ours last week. Our bank(Fifth Third) had an easy $299 refi. We went from a 30 yr(with 24yrs left to pay) 6.5% loan to a 3.4% 15 yr loan.

 

[ICF]

Did you truly have no closing costs, .

Yes -- We did a 15 yr / 2.875 (or 2.75) last summer for about $300 in closing costs.

I suppose you could argue that the rate would have been lower with more closing costs...but the rate we were given was equal to or better than those places that wanted thousands in closing costs.

We considered, but didn't do the 5/3 easy refi mentioned above-- which also had about the same closing costs but a slightly worse rate.

 

[TwistGrl101]

Great there's a refi thread.

We're in the process now, it has currently been about 90 days and all they keep doing is running us around in circles, asking for more and more paperwork. Because I am on maternity leave right now and have no income, after all of this trouble, the guy said we may not be able to work it out.

 

[marlynnp]

If you are moving within 5 years, I wouldn't do that refi.

$3300 in closing costs to save less than 1% interest over a five year period is probably not worth it (can't be exact without knowing the amount of the loan)

I would do as someone else suggested and make additional principle payments.

 

[Karlzmom]

Really? I am going to check this out now. There is about a point difference in the interest rates though???

The difference in interest rates quoted [4.675 to 3.75] is a fairly small gap. The lump principal payment will effectively reduce the amount of money the interest is calculated against as will the extra principle payments. You don't disclose the amount of the note [and that's alright] so I can't run the numbers for you to determine how much total interest you would pay in each scenario. I suspect it will be closer than you think....not to mention completely removing the stress over a possible move so close to the refi.

Its also worth looking at how many months of payments do you need to make before the closing costs let you start saving. The lump payment in to your note will start you saving on interest immediately...

Good Luck!

 

[LoveBWVVBR]

The difference in interest rates quoted [4.675 to 3.75] is a fairly small gap. The lump principal payment will effectively reduce the amount of money the interest is calculated against as will the extra principle payments. You don't disclose the amount of the note [and that's alright] so I can't run the numbers for you to determine how much total interest you would pay in each scenario. I suspect it will be closer than you think....not to mention completely removing the stress over a possible move so close to the refi.

Its also worth looking at how many months of payments do you need to make before the closing costs let you start saving. The lump payment in to your note will start you saving on interest immediately...

Good Luck!

The amount is $141K, so not too far off from the 100K number.

 

[LoveBWVVBR]

I ran the numbers with the 141K. Assuming that we would pay the $300 extra a month onto the principal and the $3300 now onto principal, we would come out about $300 ahead NOT refinancing (using the July 2018 date). The loan would be 19 years long overall, as opposed to about 18 years total if we started the new 15 year loan now.

The actual difference in payment between the 15 year new loan and the current payment would be about $250 a month, and using that number I still only found about a 3K "savings" by July 2018. That is hardly worth it considering the amount of documentation they are demanding, the amount of work that it looks like getting this refinance would even take (and we have credit scores way over 800 and no other debt to speak of, so we aren't even remotely risky borrowers for the bank).

All along, I've just felt strongly that those $3300 in closing costs are a true waste of $$. Now I know that they are. Even a while back when I could have refinanced for 2.65, I still wasn't sold on it...the closing costs just seem onerous. If I qualified for HARP2 and could do an easy refinance for a few hundred dollars, I would be all over that...otherwise, it just doesn't seem worth it when our current rate isn't exactly bad.

The only other difference I can come up with is that we'd get a somewhat higher mortgage interest deduction with the higher 15 year loan payment, but that might amount to a net of $600/year...again, not exactly huge money for the hassle of the refi. Maybe it would be worth it if we were staying here for the long run, but there is just a lot of uncertainty with the school situation right now.

 

[HeatherC]

Mortgage-net.com has a great calculator to figure out different scenarios.

 

[bumbershoot]

I learn so much from this place.

 

[Shelly F - Ohio]

If you are moving in 5 years its not worth it to refi. The $3300 in closing is just money burnt. Save the $3300 for the closing of the loan on your new house or pay it as a principle payment on the current loan.