Mortgage refinancing question from a n00b

[purbeast0]

I am still on my first mortgage of my first house right now and I'm going to be refinancing.

We're going to go with a 15yr loan and it's going to basically cut out 7 years of our 30yr mortgage with a monthly payment of like $40 more than it currently is, which is nothing considering I'm putting in extra every month as it is.

My question is mainly about the rate at this point.

My loan is with Navy Federal Credit Union and that is who I've been looking to refinance with.

I've been quoted with a rate of 2% for a 15yr loan taking no cash out. I can buy it down as low as 1.375 with points but I am probably going to buy it down to 1.675 with 1.5 discount points that will cost me like $5k. The discount point I mentioned is also build into the origination fee as well, so like, the 1.5% I'm paying will include both discount points + origination fee and drop the rate down to 1.675.

So my question is - is this a good rate or should I shop around a bit? I do like how easy they have been to deal with generally speaking as far as mortgage has gone and their dashboard, etc, so there is some benefit to keeping it with them in that aspect as well.

But generally speaking is 2% good for a 15yr loan or is there a chance i could get it even lower than that without adding any discount points on? Also, I'm a bit confused by the origination fee as they said typically lenders charge up to a max of 1% origination fee on top of discount points, but Navy Federal does it a little differently. Again, total noob so I could have that wrong slightly.

 

[zinfamous]

that's a pretty fantastic rate, even at today's fantastic rate level. Is it a real offer or one of those mailers they sent you to get you in the door/on the phone?. 15 years are generally pretty low, though. Granted, I've seen people get around 2% on a 30 year recently so I dunno, maybe you actually can get lower? I would be surprised.

I'm not sure if this counts on refinance (I assume it does, because it's basically the same thing--just a big interest payment), but remember to itemize that point purchase for 2021 taxes.

 

[pete6032]

Agree with Zin that's an amazing rate.

 

[highland145]

2% should be criminal. Almost free $.



3rd amazing rate.

 

[dullard]

Bankrate.com shows 15 year fixed rates in my area are right at about 2%. So, your quote seems right. I've never worked with Navy Federal. Shopping around costs nothing though.

 

[nakedfrog]

I recently opened an account with Navy Federal, so far it seems like a pretty good bank. Planning to do a home loan with them too.

 

[BurnItDwn]

I agree with others, that is an excellent rate. I doubt they wiill drop much more.

 

[purbeast0]

Okay I'm going to just go with it then. Yeah it seemed like a great rate and right now I'm basically paying that + an extra $1k/month. I will probably drop the $1k/mo extra just because I was planning on doing that soon anyways now that I have a second kid and my wife isn't working, but keeping the current monthly payment price basically and cutting out 7 years is a no brainer.

@nakedfrog we used them for our first home loan and they were literally the only place that would do no PMI if you didn't have anything down. We put 5% down just to get a better rate than putting 0% down but it was great not having to deal with PMI. I'm not military and neither is my wife but when she was younger before I even knew her, her friend worked at Navy Fed (still does) and got her an account there.

 

[Svnla]

2% for 15 yrs refi is a very darn good one. I just check Chase and its 15 yrs refi rate is over 2%. From my research, if you can cut down 1% to 0.75% off from your current mortgage rate = you should refinance.

Do you/spouse have to be in the military to use Navy FCU? I know that you have to if you want to do any business with USAA.

 

[purbeast0]

2% for 15 yrs refi is a very darn good one. I just check Chase and its 15 yrs refi rate is over 2%. From my research, if you can cut down 1% to 0.75% off from your current mortgage rate = you should refinance.

Do you/spouse have to be in the military to use Navy FCU? I know that you have to if you want to do any business with USAA.

Look at the second paragraph in the post above yours as to how I have a NFCU account.

Also my current 30yr mortgage is at 3.875 right now. So we're going to get it down to most likely 1.675 (with 15yr) because I'm going to pay the points. That is more than 1/2 my current one which is pretty crazy to think about.

 

[snoopy7548]

I'm considering refinancing to a 15-year as well. I'm currently on year 9 of a 30-year mortgage (3.75% rate). I've been planning to move within 5 years, but running through the calculators it seems my break-even is around 1 year, if I can refinance to a 2.2% rate.

 

[nakedfrog]

2% for 15 yrs refi is a very darn good one. I just check Chase and its 15 yrs refi rate is over 2%. From my research, if you can cut down 1% to 0.75% off from your current mortgage rate = you should refinance.

Do you/spouse have to be in the military to use Navy FCU? I know that you have to if you want to do any business with USAA.

Family members of veterans can use it too, my son is able to have a Navy Federal account because I opened one.

 

[soulcougher73]

You might want to look at what a 30 year refi offers as well, then just pay it down as a 15 year loan. But you can always fall back into the lower payment should something happen.

 

[spacejamz]

You might want to look at what a 30 year refi offers as well, then just pay it down as a 15 year loan. But you can always fall back into the lower payment should something happen.

not sure why more people don't consider this option...all you have to do is run the amortization tables with the higher payment to see the difference...

 

[ponyo]

You might want to look at what a 30 year refi offers as well, then just pay it down as a 15 year loan. But you can always fall back into the lower payment should something happen.

Sounds great on paper and people say they'll make extra payments to pay 30 into 15 year. But you know what happens in real life? They get lazy or they like paying smaller monthly payment on the 30 yr and they only occasionally make the extra payments. That 30 year becomes like 28 years instead of 15 years. Still pretty good but 15 years go by quick. Look at how many years most of us have been on this forum.

30 years is great because it gives you that flexibility but most people will lack the discipline or the willpower to pay extra each month unless they're forced by the mortgage company. So I still like the 15 year if you can afford it.

 

[jpiniero]

Didn't Fannie and Freddie insitute a tax on refis? Might want to check to make sure they aren't doing that and hiding that on the fees that you end up paying.

 

[KillerCharlie]

You should do the math on a 15 year mortgage vs. a 30 year making the same payments as a 15 year. With such low rates, the difference is really small, and a 30 year gives you the flexibility of lower required payments should your financial situation change.

 

[purbeast0]

I already submitted the application for the 15yr rate of 2% and I can buy points to lower if I want.

As mentioned the total monthly payment is virtually what I pay now for a 30yr loan so I'm not concerned about not being able to pay it. We've been paying this for 8 years and haven't had issues and I've been paying $1k/mo extra the past year or two also.

If I pay extra on the 15yr payment I could pay it off in like 10 or so years too so that is also an option.

 

[jpiniero]

Looks like ARM rates are worse than fixed right now, if you want to know where they think things are headed.

 

[bbhaag]

I already submitted the application for the 15yr rate of 2% and I can buy points to lower if I want.

As mentioned the total monthly payment is virtually what I pay now for a 30yr loan so I'm not concerned about not being able to pay it. We've been paying this for 8 years and haven't had issues and I've been paying $1k/mo extra the past year or two also.

If I pay extra on the 15yr payment I could pay it off in like 10 or so years too so that is also an option.

Good for you man. It sounds like a no brainer at the rate you're getting. Congrats on the refi!

 

[zinfamous]

I already submitted the application for the 15yr rate of 2% and I can buy points to lower if I want.

As mentioned the total monthly payment is virtually what I pay now for a 30yr loan so I'm not concerned about not being able to pay it. We've been paying this for 8 years and haven't had issues and I've been paying $1k/mo extra the past year or two also.

If I pay extra on the 15yr payment I could pay it off in like 10 or so years too so that is also an option.

yeah, that extra $1k per month you will see, from what you were just paying extra previously, is gonna make you feel super rich

 

[purbeast0]

yeah, that extra $1k per month you will see, from what you were just paying extra previously, is gonna make you feel super rich

Well we didn't take no vacations last year other than St. Thomas in March and driving to NC in the summer, so I wasn't spending money on trips all year really so that is probably why I didn't feel like I had all this extra cash lol.

 

[sciencewhiz]

I've been quoted with a rate of 2% for a 15yr loan taking no cash out. I can buy it down as low as 1.375 with points but I am probably going to buy it down to 1.675 with 1.5 discount points that will cost me like $5k. The discount point I mentioned is also build into the origination fee as well, so like, the 1.5% I'm paying will include both discount points + origination fee and drop the rate down to 1.675.

There's usually a curve, where if you buy down the rate too much, you pay a larger points per rate reduced. Make sure you're on the good side of that curve.

While it seems unlikely that rates will fall significantly farther, consider that it may make more sense to take a no points mortgage now, and then refinance again if rates fall farther. If you pay points to buy down the rate now, rates would have to fall even further in the future to make refinancing make sense.

 

[kt]

There's usually a curve, where if you buy down the rate too much, you pay a larger points per rate reduced. Make sure you're on the good side of that curve.

While it seems unlikely that rates will fall significantly farther, consider that it may make more sense to take a no points mortgage now, and then refinance again if rates fall farther. If you pay points to buy down the rate now, rates would have to fall even further in the future to make refinancing make sense.

Totally agree with what this assessment. Unless you are planning to keep that rate for longer than the break even point (whether it's selling , refinance or pay off the home) it doesn't make sense for you to buy down the rate. Say you buying down the rate for $5K saves you $50/month, it would take you 100 months to break even. If you sell, refinance or pay off your loan before 100 months it wasn't worth buying down the rate.

 

[zinfamous]

Totally agree with what this assessment. Unless you are planning to keep that rate for longer than the break even point (whether it's selling , refinance or pay off the home) it doesn't make sense for you to buy down the rate. Say you buying down the rate for $5K saves you $50/month, it would take you 100 months to break even. If you sell, refinance or pay off your loan before 100 months it wasn't worth buying down the rate.

that's why I instead went with a HELOC-only instead of refinancing at these rates today. I'm still about 2 years away from breaking even with the points I purchased, and that time also puts me in the clear for zero fees on this HELOC that I took out back in ~October. (The HELOC was just for repairs that I need/will need relatively soon. I took 0 cash out on it)