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Deciding to Re-Finance

December 23rd, 2011 at 10:37 pm

Last year, my mortgage company (Wells Fargo) called me and offered me an easy refinance...no appraisal, no cost (though I'm not sure what that means...I'll have to look at the documents I have from last year to be clear). Last year, even though I was approved for the loan, I didn't go through with it, because I was employed only part-time and still collecting unemployment, and I was worried that somehow things would come back to "bite" me.

Now that I'm employed full-time again, it makes sense to think about refinancing with the rates so low. So I googled "mortgage refinance calculator," pulled one up, filled it out, and, as typically happens with these, got a list of potential lenders to call me rather than an actual printout of an estimate.

I talked to two of them today. Seems like I can go from a 30-year mortgage with 24 years remaining at 5.875% to a 20-year mortgage at 3.75%, AND lower my monthly payment by about $50. Sweet.

And, of course, if I keep on paying the same amount, I lower the payoff date to about 17 years, which brings me to full retirement age (not that I plan to retire then, but I want to be ABLE to, debt free).

So I'm going to do it. Now I need to figure out who to do it with. I have two phone quotes (both of which agreed that I can get the 20 year 3.75% rate; one also offered a 15-year, 3.5% loan, but that takes my payment a little bit higher than I'd like it).

If I stay in the house, I'll save about $24,000 in interest over the life of the loan (less any points or closing costs, which still leaves savings of over $20,000). Even if I decide to move and even if there are points or closing costs, it would be worth it in just a year or two.

I know that with both of the lenders that I spoke to today, there'd be an appraisal to get. Don't yet have the details on other closing costs.

Now I need to contact Wells Fargo and get their rate and see if it is comparable, and weigh whatever that is against avoiding the hassle of getting another appraisal.

This is my first house and I've never refinanced before. Any words of wisdom on things I should look at for as I navigate this process?

3 Responses to “Deciding to Re-Finance”

  1. MonkeyMama Says:

    Good Luck!

    I've lost track how many times we refinanced. Every 1% drop down, plus moved, so may have ticked back up and then refinances back down. But, first mortgage was 8.25%+ and now we are getting down to 4%. Which is AWESOME. These are record low rates - definitely take advantage.

    I personally have found that lower mortgag rates (i.e. 3.75% variety, today) will come with higher costs. They are probably charging point? If they pay all the fees, the interest rate will simply be higher. I am not a fan of paying points, BUT, I rather just get the lower rate and pay cash for the closing costs. Meaning, take the lower rate, but not if you cost you points. Though with these record low rates, if you will be in your house a while, it may be worth paying points and locking in that rock bottom rate for the rest of your loan. We took that gamble last time thinking we would never refinance again. This time I don't want to pay points again. But that is the only reason I am not going to do it again, this time.

    I don't know how you feel about escrow, but most lenders will charge you a higher rate if you don't escrow taxes and insurance. Just a heads up.

    We've generally only refinanced with friends or people who came highly recommended. I've heard some other big places recommended, but the online reviews were terrible, so makes me wary. That said, I am trying to refinance with my CU at current (great rate - no points - no escrow) but their customer service is not that great - they are just slammed and it's not a friend I can really bug, like I am used to. BUT, I think mortgage broker *friend* was really hurt I didn't go with him. I really could care less about the hassle factor because the savings will be so large. It really comes down to the RATE. & the cost to get that rate. I don't think my CU will try to completely screw me over, so is another factor.

    Anyway, I hope any of this helps. I generally make sure there is no pre-payment penalty and stuff like that, but no one has ever tried to push that stuff on us when we go for the plain old fixed rate mortgage.

    Check mortgage rate on 30 years. IF it is same as 20 years, you can just do the 30-year loan and pay the 20-year amortization. Just an idea - also why we did not go 20 year - there was no savings to do so - just forced bigger payments.

  2. MonkeyMama Says:

    P.S. Just to be clear- I meant we will pay down ours like a 20-year mortgage, but will have the lower payment for uncertain times. I think that is the best of both worlds. I am sure some need or prefer the shorter term - just depends what you want. I'd take 20 years for a discounted rate, of course.

  3. Dido Says:

    Yes, that I understand. That's why I have a 30 year mortgage...never intended for it to take 30 years, otherwise I'd be 75 before it was paid off! If I do this refinance and keep on paying the same payment, I'll be 67 or 68, which is much more reasonable. I plan to work until at least 70...I just started this new career and it seems reasonable to give it 20 years like I gave the last one!

    I do think the 20 year rate is lower...one lender gave me rates for 20, 15, and 10 years and each one was .25% lower than the previous.

    I did not know that about folding taxes/insurance into escrow making things a bit cheaper. But that's how I prefer to do it anyways, so that's all well and good.

    Thanks for your thoughts--appreciated!

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