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My current 30-year fixed mortgage has a balance of $112,000 at 5.5% interest rate and my payments are $1149 which includes hazard and property taxes. I do not pay PMI. My home was valued at $137,000. I started looking into refinancing about 2 months ago. I am working with a mortgage company that will refinance at 4.75% but I am paying points to get that rate. By the time all is said and done about $9,000 will be tacked on to the loan - that includes refinancing fees, points, etc. So the total amount I will owe will go from $112,000 to $121,000. This is another 30-year fixed and I will have to pay PMI. My payments will go from $1149 to $1050. There was an appraisal done and my home is now valued at $127,000. When I first started looking into refinancing it looked like a great idea but since the LTV has changed it is not looking like such a good deal for me. Any advise would be appreciated.

JKennedySLG · Posted: Thu Aug 13, 2009 12:43 pm Post subject:

A $90 monthly savings is not so great when tacking on an additional $9,000 to your principal balance. I would suggest you stick with your 5.5% and wait for rates to come back down. That deal is not worth it. I hope this helps...

sunnyca2009 · Joined: 04 Aug 2009 Posts: 1731 35.55 Dollars($)

This is absolutely not a good idea

When you look to refiancne at a lower rate,. you need to make calcuate all the cost involved along with how much you say every month

Jimmymackin · Joined: 17 Aug 2009 Posts: 66 0.65 Dollars($)

Teresa, there is a simple formula that anyone can use to determine what the true cost of a refinance are...Take you Monthly savings 90 divide that by the amount of the increase to your prinicipal balance 9000.00 est = 100 months or 8.33 year to recoup your cost...I am personally suprised that the lender is even approving the loan becuase in most instances cannot exceed 5 years for Cost to Recoup....

There is also an intangible element to this....What is your monthly cash-flow situation? Are you living pay-check to pay-check...or are you living comfortably....If you are struggling to make payments, I would suggest looking into a loan modification as oppose to a high cost refinance...

Without knowing your entire financial situation, I would advise against this refinance....Save you money and apply additional payments the prinicipal, you will shave years off your term and 10,000's in interest.

Good luck

devidas_padir · Joined: 01 Mar 2009 Posts: 49 6.41 Dollars($)

I also do agree not to go refinance only for saving purpose.
0.75% of 137000 for 30yrs is is roughly 30K and if you loose on fees, time and efforts, refinancing looks to be not to be recommended option.
For still lower interest rates and for other purpose e.g. raising funds for some extra activities, this will be a case to think again.

gmakerley · Posted: Tue Aug 18, 2009 7:51 am Post subject:

well said, jimmy. as for the cash-flow situation and the review of same that you suggest the borrower undertake...i would have to guess that $99 monthly isn't going to make a world of difference. by that i mean that reducing the payments a whopping $23 per week wouldn't seem to be a particular benefit to her overall budget, no matter how strapped she might be at this time.

i am in full agreement with what's been stated here - no way should she undertake this transaction, given the $9000 in new debt that it entails.

oh...yes i did understand where you were going with that jimmy...i guess i just wanted to be heard on my $23/weekly stance.

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