Refi Home Mortgage to drop 1%

[Holladay]

I have refinanced our home a few times. I thought the school of thought is that it is worth doing if you can drop the interest by 1 point.

Currrently, ours is at %3.75. I see ads for %2.6. Is that enough to justify a refi. We have ~14 yrs left and the %2.6 is for 15 yrs.

Thoughts?

[Perineum Ripper]

If you actually get a full point off, will get approved, and plan on not moving until completely paid off. I say go for it, should save you quite a bit.

[DJ's left nut]

Originally Posted by Holladay

I have refinanced our home a few times. I thought the school of thought is that it is worth doing if you can drop the interest by 1 point.

Currrently, ours is at %3.75. I see ads for %2.6. Is that enough to justify a refi. We have ~14 yrs left and the %2.6 is for 15 yrs.

Thoughts?

I went ahead and did roughly that exact figure at 2.625 over 15 years.

I mean the math's pretty easy to run really. I don't recall what we saved by flipping our 30 year w/ 25 left on it at 4.1% down to the 15 at the 2.625, but it was six figures. Have us paid off by the time the kids are all 18.

Ultimately if you save more than the $3-5K in closing costs (and you definitely will if you're getting a full point over 15 years), then yes, it's worth it. I can't imagine rates will ever get too much lower than that and if they do, it won't be enough for you to care too terribly much (and besides, you could always refi AGAIN at that point if it dropped another 1/2 point or so. Again, the only 'waste' becomes the closing costs).

There's just so little risk for a potentially MASSIVE return.

[lewdog]

Figure out your break even point in terms of years to get back your closing costs/fees. We took about 1% off and our break even was slightly over 5 years. If you plan to stay in the house longer than that, it makes sense.

[Renegade]

I did a refi right when COVID started. Closing costs I figured would take 4 years to pay off, no big deal. On my refi I took all my savings and applied it right back to principal. I saved $200 a month on the refi, now an additional $200 is going to principal instead of the bank.

[The Franchise]

Originally Posted by Renegade

I did a refi right when COVID started. Closing costs I figured would take 4 years to pay off, no big deal. On my refi I took all my savings and applied it right back to principal. I saved $200 a month on the refi, now an additional $200 is going to principal instead of the bank.

We’re doing the same. $400 back to the principal every month. Dropped the interest rate from 4.625% to 2.99%.

[tyecopeland]

I had less than 9 years left on my 15 year fixed and even with closing costs would end up saving money with refinancing. But instead I'm going the cash out route and lowering my rate and getting some money to work on the house. With the amount Ive been paying I'll still get it all paid off in a total of 15 years with the lower rate.

I'd say its definitely worth it. Problem is for me I was told there is about a 3 weeks backlog on the 15 year fixed rates in my area.

[MahiMike]

Rule of thumb is 2 points.

[MahiMike]

Even on 15 year loan takes 5 years before you catch up on interest. Banks have it figured out.

[Holladay]

15 yr @ 2.6% 1k payment monthly closing 3.4k
10 yr @2.5% 1.4k monthly closing 4.8k

12k interest savings on 10 yr.

Cash flow isn't a problem. We over pay now on 1.2k

Maha Mike a 2% difference is huge. I understand the costs with refi and a .5% is not worth it.

The question is cash flow.




What got me was the difference between 15 and 10 yrs. $12,000. Yes, 1.2k deferential in closing, but I use the house for the next 20 yrs it is marginal.


Another thought process:

Good Lord 2.5%? 15 yrs ago that is what the banks were paying on savings accounts!

Almost free money.

When we refi at 3 7/8% a few years ago, I said we would never refi again. We live in a strange world. Time to take advantage of it.

[TribalElder]

Yes it's worth doing, you won't be adding much time to the loan

[tyecopeland]

Originally Posted by Holladay

15 yr @ 2.6% 1k payment monthly closing 3.4k
10 yr @2.5% 1.4k monthly closing 4.8k

12k interest savings on 10 yr.

Cash flow isn't a problem. We over pay now on 1.2k

Maha Mike a 2% difference is huge. I understand the costs with refi and a .5% is not worth it.

The question is cash flow.




What got me was the difference between 15 and 10 yrs. $12,000. Yes, 1.2k deferential in closing, but I use the house for the next 20 yrs it is marginal.


Another thought process:

Good Lord 2.5%? 15 yrs ago that is what the banks were paying on savings accounts!

Almost free money.

When we refi at 3 7/8% a few years ago, I said we would never refi again. We live in a strange world. Time to take advantage of it.

What happens if you just pay 1.4 on the 15 year? Im not sure the extra .1% is worth the extra closing cost.

[Bob Dole]

When I bought my fist house, “we’ll probably never see rates as low as 10% again”.

Crazy.

[neech]

Originally Posted by MahiMike

Rule of thumb is 2 points.

That's what I understand as well.

[DJ's left nut]

Originally Posted by neech

That's what I understand as well.

That math just doesn't check out and it may date back to when a 2 point reduction was from 10% and actually feasible.

But if you're sitting there at 4% on a 30 year note, are you really going to try to say it takes a drop to 2% to make it cost effective? No !@#$ing way. Not even close.