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Refinance now??

Belchfire1

Belchfire1

Nep status
Jun 27, 2013
866
376
63
Encinitas
We're only 2 years in on our mortgage 4.00% and are looking to refinance at 3.75% locked rate, no points. The property value has increased 100k (speculative until appraisal but also conservative based on neighborhood comps) We have an FHA and would be able to get out of the PMI ($300 or so a month, we will keep paying the same each month, so we can pay down the mortgage a bit quicker) crap we're currently paying. I'm no expert but this seems like a good idea. Any thoughts from the armchair pros on here?

Cheers, Belch
 
Ifallalot

Ifallalot

Duke status
Dec 17, 2008
88,911
17,960
113
If you have an FHA loan you can do a "FHA quick refinance" that will allow you to drop the points without getting an appraisal.
 
HatterasGlass

HatterasGlass

Michael Peterson status
Apr 6, 2008
2,132
1,155
113
I just closed on a construction loan at 3.875%.
Thought that was pretty good.

I'm no expert - but what will the closing costs be for the refi and how does that compare to the overall 0.25% savings?
I assume its probably in your favor but thats what I always remember hearing when talking about refi.
 
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Pancakes15

OTF status
Mar 17, 2015
181
8
18
You know refinancing costs you more money in the long run right? Sure your monthly payments are lower but your entire term starts over and guess what? If before you refinance every payment you were making lets say 80% was going towards interest and 20% to principal, after you refinance 95% of your payment is going to interest and 5% to principal. These numbers are rough, but you get the point. Your payments go down but you're further delaying how long it takes to make actual payments towards your principal.

Banks aren't in the business of making less money for themselves.

Plus you add in all the refinance fees.

Never....refinance.
 
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Driftcoast

Michael Peterson status
Aug 5, 2002
3,467
957
113
Pancake is very wrong. Makes sense to refi when you run the numbers and they come out in your favor. Short term, like under 5 yrs, probably not worth it.

If you can get 2% lower, you make up the costs in about 3 yrs.

.25% not really worth it though unless you go to 10/15 yr from 30 yr. Look up finance calculators and figure it out for yourself.

https://www.nerdwallet.com/mortgages/refinance-calculator
 
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Pancakes15

OTF status
Mar 17, 2015
181
8
18
Driftcoast said:
Pancake is very wrong. Makes sense to refi when you run the numbers and they come out in your favor. Short term, like under 5 yrs, probably not worth it.

If you can get 2% lower, you make up the costs in about 3 yrs.

.25% not really worth it though unless you go to 10/15 yr from 30 yr. Look up finance calculators and figure it out for yourself.

https://www.nerdwallet.com/mortgages/refinance-calculator
Click to expand...
How long would someone be working at a bank for that came up with a way for them to make less money?

Go look at an amortization sheet and tell me how you don't spend more money over 30 years when you start your term over refinancing.
 
F

Fritzo

Legend (inyourownmind)
Mar 4, 2010
466
0
16
Pancake has a point but you can make up for that differences by including additional "principal only" payments from time to time, or possibly switching to a bi-weekly payment rather than monthly.

Like he said, analyze the amortization table for the two options for the best comparison.

Add that $300 PMI payment to the amortization table for your current loan until you're under 80% LTV (I think this is when you're release from insurance) and compare apples to apples.

savings accounts suck, I'm not sure how much to invest in index funds, but I feel like I'm saving 3.75% on my money every time I do a principal-only payment.
 
Ranga

Ranga

Billy Hamilton status
Dec 31, 2008
1,685
1,428
113
Belchfire1 said:
We're only 2 years in on our mortgage 4.00% and are looking to refinance at 3.75% locked rate, no points. The property value has increased 100k (speculative until appraisal but also conservative based on neighborhood comps) We have an FHA and would be able to get out of the PMI ($300 or so a month, we will keep paying the same each month, so we can pay down the mortgage a bit quicker) crap we're currently paying. I'm no expert but this seems like a good idea. Any thoughts from the armchair pros on here?

Cheers, Belch
Click to expand...
I'm a mortgage guy -- PM me. If you're not paying points and getting out of the FHA loan (MI for life) it's a good deal based on current rates. But I think it's gonna get better . . .
 
Ranga

Ranga

Billy Hamilton status
Dec 31, 2008
1,685
1,428
113
I can't lend in CA, but will be glad to give you my $.02
 
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Belchfire1

Belchfire1

Nep status
Jun 27, 2013
866
376
63
Encinitas
The removal of the PMI is the main driver. We can afford the mortgage and will continue paying the same amount every month, but the $300 something in PMI will go towards principal each month.
 
Ifallalot

Ifallalot

Duke status
Dec 17, 2008
88,911
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sd_101 said:
Similar vein what math does a PMI make sense?

Sure, 20% down is brutal on your cash but at the same time why are you buying if you can’t stomach it?
Click to expand...
Have you looked at home prices lately?

People don't walk around with $250k in liquid cash
 
Ifallalot

Ifallalot

Duke status
Dec 17, 2008
88,911
17,960
113
Belchfire1 said:
The removal of the PMI is the main driver. We can afford the mortgage and will continue paying the same amount every month, but the $300 something in PMI will go towards principal each month.
Click to expand...
Which means you gain more equity. Do it, its a no-brainer
 
G

gbg

Miki Dora status
Jan 22, 2006
3,958
3,514
113
Yes, do it. I refinanced twice in 3 years. Mortgage payment dropped $475 altogether.

 
laidback

laidback

Tom Curren status
Feb 9, 2007
11,059
2,204
113
NOC
Belchfire1 said:
The removal of the PMI is the main driver. We can afford the mortgage and will continue paying the same amount every month, but the $300 something in PMI will go towards principal each month.
Click to expand...
That's a win
 
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FishFace

Miki Dora status
Aug 8, 2009
3,944
14
38
Del Mar, CA
I do VA and FHA streamlines all day long. The FHA monthly payment is .85% of the loan amount divided by 12.

So youre really paying 4.85%. if you get a conventional at 3.75% or even 4% - Youre winning. Just dont pay a lot of points.

hit me up if you want another quote. you can take the appraisal to other lenders


btw youre on 28 years left. some lenders can set the term the same. otherwise have your LO calculate the extra principal you need to pay to pay off in 28 yrs. that defeats the amortization reset.
 
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GDaddy

GDaddy

Duke status
Jan 17, 2006
29,238
2,056
113
Carlsbad
You can refinance at different amortization schedules, 15 yrs instead of 30 yrs is a common alternative. You might be able to get a 25yr loan which would actually pay off a little sooner than your current mtg.

Let's say your outstanding mtg is for $400k.

The principle+interest payment for a 30yr loan at 4% is about $1910, not counting property taxes, insurance and PMI
The principle+interest payment for a 25yr loan at 4% is about $2110
The principle+interest payment for a 25yr loan at 3.75% is about $2055

Of course, none of this takes into account your origination costs (loan fees and such). That adds up, too

Some of the decision making here will involve how long you intend to hold the property, through hell and highwater and possible divorce or job loss. These are serious factors that will vary by individual situation.

 
92122

92122

Michael Peterson status
Jul 29, 2015
2,611
1,044
113
Refi’d to a 15-year fixed a couple years back at 3.5% which will save us something like $80k over the life of the loan compared to our previous 30-year. As risk averse as I am, the payment only went up like $900 a month, so hoping all goes well and we have the house paid off in our late 50’s.

Were fortunate enough to avoid PMI but it was on the table at one point.
 
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