Should we refinance our mortgage?

[LoveBWVVBR]

We currently have a 30 year loan at 4.875%. We have probably 50% equity in the house. We plan to stay put until the kids are grown (so another 15-20 years, minimum). We are a little less than 2 years into the mortgage.

We can refinance the loan at 30 years for 4% or 15 years for 3.25%. It seems like a no-brainer to me to do the 15 year since it would only raise our payment like $200/month. The 30 year would lower our payment by about $100/month. The closing costs are insane, though! It would cost $3600 to refinance through the credit union or through our current lender (Wells Fargo). They have no streamlined refinancing options anymore. If you want to refinance, you pay $3600. DH thinks that we could just prepay the mortgage on our own and not worry about refinancing (we've done that before...paid our first house off in 3 1/2 years). I think that we should refinance. Those closing costs are onerous, though! Opinions?

 

[WeLuvDCL]

This is great calculator for finding out how much money you would save refinancing to 15y versus just paying extra. http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

Once you do the comparison, I think you will find that it is definitely worth it to refinance to the 15y mortgage. You would probably have to pay about $500 extra a month on your current mortgage to even come close to the savings of the 15y with lower interest rate. Especially since you are only 2y into your currently mortgage. The $3,600 can be included into your loan if needed since you have so much equity and it should still only take you less than a year to recoupe that money in interest savings.

 

[ilovemk76]

We currently have a 30 year loan at 4.875%. We have probably 50% equity in the house. We plan to stay put until the kids are grown (so another 15-20 years, minimum). We are a little less than 2 years into the mortgage.

We can refinance the loan at 30 years for 4% or 15 years for 3.25%. It seems like a no-brainer to me to do the 15 year since it would only raise our payment like $200/month. The 30 year would lower our payment by about $100/month. The closing costs are insane, though! It would cost $3600 to refinance through the credit union or through our current lender (Wells Fargo). They have no streamlined refinancing options anymore. If you want to refinance, you pay $3600. DH thinks that we could just prepay the mortgage on our own and not worry about refinancing (we've done that before...paid our first house off in 3 1/2 years). I think that we should refinance. Those closing costs are onerous, though! Opinions?

Since you are planning to stay for 15+ years, I would refi to the 15 year mortgage.

 

[LoveBWVVBR]

Does $3600 sound like a normal amount of closing costs for a refi these days? That just seems so crazy-high to me. Maybe I am really out-of-the-loop on these things, though.

 

[ICF]

Isn't there another lender you can go thru with lower Closing costs and a similar rate / term?

$3600 seems like a lot....especially since I only paid about $300 to go to a 20 yr / 3.75% loan earlier this year.

 

[WeLuvDCL]

I forgot to mention - give the bank a copy of your certified survey from your loan 2 years ago and tell them you want to use the same title company as last time, this should knock offf a couple hundred from their estimated closing costs.

 

[Scubee]

Some places will charge over 1% of the loan in fees. I've seen it higher and seen it much lower. It depends heavily on who you are dealing with and of course on your credit score. We paid about $2k to refi but we were lowing our rate by over 2% at the time and was willing to do so. Our break even point was less than 3 years and we knew we would remain in the house that long.

This isn't meant to sound harsh or mean, but are you already making extra payments equal to what would be the new 15-year mortgage payment? If not, what makes you think you'll consistently do that in the future? The reason I ask is that I've seen too many people promise themselves that they'll "pay extra on the house" yet they can't stay committed. The refi puts you in the position of committed.

Without knowing your household cash flow (and you don't want to share that here), I'm not really comfortable giving advice of should you or not. Good luck on your decision.

 

[lost*in*cyberspace]

Does $3600 sound like a normal amount of closing costs for a refi these days? That just seems so crazy-high to me. Maybe I am really out-of-the-loop on these things, though.

I do not know the average cost, but we just refinanced (Prime Lending) and we paid only for the house appraisal, which was something like $300.00. We even got $70 back at closing.

 

[dizkids]

Is it possible to shop around? It does a sound a little high.

 

[starry_solo]

I re-financed and came up with about $4000+ in "closing costs." Looking at the breakdown, it really only cost me the $300 appraisal fee because the rest went to pay the real estate taxes, recording fee (for the new mortgage), and the first month payment.

Ask your lender for a breakdown of costs. The recording fee along (in CA) was at least $100+.

 

[mrsklamc]

Try some local credit unions. Ours doesn't do closing costs at all, just $300 for the appraisal. And I definitely think the 15 year is the way to go.

 

[CluelessDisFan]

I think you should shop around.

 

[Shelly F - Ohio]

We are in the process of refi our home and it will save us $425 a month. I would say go for it. Our closing cost are $2200 no appraisal because we qualify for the HARP program. The money we save we are going to make an extra principle payment which will save us even more money.
Remember your closing cost will have all your prepaids factored in such as they normally require 2 months of escrow for home owners ins and property taxes.

 

[NYtoFLA]

Currently doing refi in ny with a credit union and 3600 sounds about right you have to breakdown all the charges for your municipality for instance here in ny if you switch lenders you have to pay a transfer tax of 1% appriasial 360 ish, credit reports,insurance,title,attorney and recording fees make up the rest per the truth and lending disclosures and this is no points or origination fees what so ever and 8oo credit scores so I would say this is more about locality

 

[clh2]

Does $3600 sound like a normal amount of closing costs for a refi these days? That just seems so crazy-high to me. Maybe I am really out-of-the-loop on these things, though.

We JUST received a "good-faith estimate" for closing costs for our refinance. We know for a fact that our fees (i.e. appraisal, closing costs, title costs, credit checks, etc) are $1600. THEN...there are estimates listed for prepaid interest...1-year homeowners insurance policy. We are not escrowing any taxes or insurance, but if we were - that would be on the estimate too.

SO - while $3600 may sound high - you really need to know what it all covers. I.e. - in our case - we already have a homeowners policy in place, so while there is an estimate of $1200 for this on our good-faith estimate - we know that we will not need to have any additional insurance.

Hope that makes sense.

We are going from a 30 year at 4.95% (27 years left) to a 15 year at 3.15%. Doing a couple of things that includes taking cash out to help with college for DD - and we will STILL be paying less than our current monthly payment for a home equity and our mortgage- plus we are knocking off 12 years off the current mortgage. (And - yes - because of the multiple group of things we want this mortgage to do - we did consult our financial advisor.)

 

[kmacht]

We have refinanced twice. Once to lower the interest rate and a second time to roll in the money we owed on a heloc for an addition to the house. Both times the "closing costs" were around 3k. That sounds bad initially but it wasn't too bad when you looked at the overall picture. Most places are going to charge you similar prices for things like apraisals, doc fees, etc. The biggest charges and drivers are going to be driven by what day in the month you close on and how much is in your escrow account vs when the next tax payment is due. If you close on the 2nd of the month and the billing date is the 1st you are going to pay that months interest plus the next months. Again, that sounds bad but what happens is that you won't get a mortgage bill for 2 months so when figuring costs you have to subtract out what you would have paid those two months anyways. It requires more money up front but after 2 months you are back even again. For the taxes there are all sorts of rules as to how much they have to keep in escrow. On both of our refinances they added that ammount into the closing cost but did not subtract out what we had in escrow with the current bank. We paid the money to put into escrow at closing for the new bank and the old bank sent us a check for the ammount that was in their account. It took about a month after closing to get the money but again, you usually end up about even.

Keith

 

[amcnj]

There are on-line calcualtors that can show you the effects amortization table wise of paying extra each month, so you can compare the shorter term refi versus pre-paying. It can be an effective strategy, but make sure that you will not have any prepayment penalies. My state does not allow them, but I don't think that is universal.

 

[4luv2cdisney]

As someone who is in the process of a refi and did a lot of shopping around, this is what I found in our area:

"Big" banks: higher rate, higher closing fees
Quotes I rec'd: rate: 3.875 - 4.25, and fees of 3-4K

Broker: the higher the rate, the lower the fees and vise versa; They would send me a list daily with 3 options. They offered a closing cost "credit" for a higher interest rate.
Ex: Rate: 3.625 cc:$3100; rate:3.75 cc:$1100; rate:3.875 cc -$500

Credit Union: a little more balanced, not many options; rates didn't seem to fluctuate by the minute; flat rate closing costs, a nonrefundable app fee (paid only when you lock your rate - after preapproval) Have to be a member, but it may be pretty easy to become a member...like by opening a checking or savings account.
rate: 3.625 costs: $2K

Like others have said, the title company fees, recording fees, "prepaid" items, appraisal fee, etc are all likely to be the same or very similar from bank to bank in an area. The biggest variable will likely be the origination fees. In all cases, they offered to roll in closing costs, so nothing needed to be paid oop.

 

[jshuff1]

yes do it 15 year

 

[stich1fan]

We just refinanced. The $3600 does not sound high to me, more like average.

I think it is always worth it because you are locked into a smaller must pay a month amount and if you decide to pay more it is your choice. Currently I think paying off all loans faster is the way to go. You get very little in interest from the bank now a days.

I would def refinance!