Posted on: 09th Jul, 2009 08:36 pm
i currently have a 30 yr fixed mortgage at 6.5% apr, and am seeing refinance rates for my area at about 5.5% apr. should i refinance for only a 1% difference with about 28.5 yrs left and balance of about $120,000? or would the closing costs and fees make it about a wash for any savings?
Hi metallicman
Whether or not you should refinance the property would depend upon the how long you want to stay in that property. If you are planning to stay in that property for a longer period of time, say 7-8 years, then it would be worth refinancing the property. It will help you in saving some money in the long run. However, if you want to move to another property within a year or two, then I don't think you should refinance it.
Thanks
Whether or not you should refinance the property would depend upon the how long you want to stay in that property. If you are planning to stay in that property for a longer period of time, say 7-8 years, then it would be worth refinancing the property. It will help you in saving some money in the long run. However, if you want to move to another property within a year or two, then I don't think you should refinance it.
Thanks
To figure out whether it is worth to refinance, you must calculate the total refinancing costs and answer the question that may help you decide: How many months will it take to break-even? You should consider refinancing if you plan to stay in your home for more than the time it takes to break-even.
Here's an example. If the total refinancing costs are $2,000, and your monthly savings on the new loan are $100, it will take you 2000/100=20 months to break-even. If you don't plan on staying in the house that long, it won't pay to refinance.
A general rule states that if rates drop by two percentage points, that was the time to refinance. However, it could pay off to refinance with only a one percent lower rate if you find a good deal on refinancing costs. New lender may be willing to negotiate a reduction of points or a waiver of the title search, application, credit check, or other fees.
Here's an example. If the total refinancing costs are $2,000, and your monthly savings on the new loan are $100, it will take you 2000/100=20 months to break-even. If you don't plan on staying in the house that long, it won't pay to refinance.
A general rule states that if rates drop by two percentage points, that was the time to refinance. However, it could pay off to refinance with only a one percent lower rate if you find a good deal on refinancing costs. New lender may be willing to negotiate a reduction of points or a waiver of the title search, application, credit check, or other fees.
the net savings will be negligible, in my opinion (without doing the math on a calculator). i'd suggest you're better off simply making additional principal payments on a regular basis (preferably monthly), thereby reducing your principal balance more quickly and resulting in less interest paid. if you can do that, you'll shave years off your loan term.
metallicman3d
Welcoem to the forum
You need to cosnider how liong you want to stay in the house and how much your closign cost would be.
Good luck and feel free to ask
Welcoem to the forum
You need to cosnider how liong you want to stay in the house and how much your closign cost would be.
Good luck and feel free to ask
Hi metallicman3d,
you need to do the calcuation: current monthly payment, future monthly payment after refi, and refinancing closing cost. Then you will get how many months it will take to break even, let's say 8 months as an example, after 8 months, you will start seeing you save money.
In the above example, if you know you are not going to stay in that home for more than 8 months, then it is not worthy to do refi even if the interest rate is lower.
Hope this would be helpful in your refinancing decision.
Thanks.
you need to do the calcuation: current monthly payment, future monthly payment after refi, and refinancing closing cost. Then you will get how many months it will take to break even, let's say 8 months as an example, after 8 months, you will start seeing you save money.
In the above example, if you know you are not going to stay in that home for more than 8 months, then it is not worthy to do refi even if the interest rate is lower.
Hope this would be helpful in your refinancing decision.
Thanks.
I think everyone is missing the real calculation of refinancing. The question is how long have you paid your mortgage for. I think from your question that it was 1.5 years. In the past 1.5 years you have spent $12,600 of interest to the bank and roughly $3K principle. Refinancing for additional 30 years means that this money goes to the trash. If you plan to stay in this place for less than 15 years and you can cover the expenses of the refinance w/i a couple of years (assuming you do not plan to leave this place prior), I think you should refinance. If you plan to stay the entire 30 years, I am not sure it is worth it. Assume you will save $70 a month * 28.5 years =24K of savings over 30 years. $24K-$12.6K-(closing costs) ==> would provide you the cost benefit calculation.