Refinance? If so with who?

[RadiclDreamer]

I currently have about 55k left on my home mortgage @ 5.98% interest (ouch!) My credit score at last check is 812. Is it work paying all of the costs to refinance? If so, who would you recommend without a bunch of gimmicks? I really dont want to do biweekly payments or automated withdraw or any of that.

 

[Fritzo]

Look for a local bank with those stats. You should be able to get 3.5-3.8% no problem.

 

[Vdubchaos]

You are not going to save much but it's still probably worth it. I would recommend doing one of those "should I refinance" calculation. Pay attention to how much you will save over 30 years (or whatever loan length you choose) and your break even point (this is important).

In general:
- stay away from middle man/brokers (sure they CAN be helpful but truth is 99% of them are NOT....quite the opposite actually).

- Small Banks/local credit unions with good reputation (ask around)

- last, stay away from the big guns. For reasons that everyone and their mother should know by now....but many still don't.

 

[RadiclDreamer]

My goal is to have the house paid off in 5 years, its a stretch but its still a goal.

 

[ViviTheMage]

I went with my original lender ... USBank, they got me 3.25% 8 months ago ... I am now buying a house and renting out my condo and I got in at 3.25% again...I bet if you got a 15 year mortgage, you could land 2.xx ... If I recall, you are in my area? I can give you the contact to my guy who I used at USBank. But if you have some odd restrictions on your mortgage with whichever bank, you might be stuck with having to refi with them.

 

[highland145]

$55K @5.98 for 5 years...$63.3K

@3.5% for 5 years...$60K

Save $3K on interest to be eaten up by costs/fees/closing. You'd have to total all the fees up.


3.25%...$59.6K

 

[RadiclDreamer]

Well what brought all of this up was my boss said about a year or so back he went with ING and they had a no closing cost refinance but the downside is you have to have a payment auto paid every 2 weeks which im just not cool with, im old fashioned that way.

 

[highland145]

Well what brought all of this up was my boss said about a year or so back he went with ING and they had a no closing cost refinance but the downside is you have to have a payment auto paid every 2 weeks which im just not cool with, im old fashioned that way.

Actually can save some $$ by doing that. Have to look into it to see if it's worth it.

Edit: Nope.

• Myth No. 2: Paying twice a month reduces the compound interest on your mortgage.
  Wrong. In fact, even though you are paying biweekly, chances are your loan servicing institution is paying your loan monthly. Which means that if you buy into a biweekly plan, you are actually loaning the servicing company half of your mortgage payment -- interest free -- for at least two weeks every month.

 

[iamwiz82]

Well what brought all of this up was my boss said about a year or so back he went with ING and they had a no closing cost refinance but the downside is you have to have a payment auto paid every 2 weeks which im just not cool with, im old fashioned that way.

That probably meant that they rolled the closing costs in somewhere, they can be sneaky.

 

[vi edit]

How far are you into your original loan? I really don't see much value here because all you are really going to do is reset your amortization schedule and get a lower payment that way. You are looking at $2k'ish for a basic refi and you'd barely break even on that, especially if you are far into the original and resetting your loan terms.

 

[RadiclDreamer]

How far are you into your original loan? I really don't see much value here because all you are really going to do is reset your amortization schedule and get a lower payment that way. You are looking at $2k'ish for a basic refi and you'd barely break even on that, especially if you are far into the original and resetting your loan terms.

Im 6 years into a 30 year. I don't plan on paying any lower payments, if anything im still paying way more than I have to and have been since day 1

 

[blinblue]

It looks like 15 year rates are at about 2.9%, and $1500 closing costs (?, not too sure one this one)

If you decide to stay with your mortgage and instead of refinancing throw that $1500 closing cost towards the mortgage. By my calculations, if you pay off the $55k-$1.5k in 5 years at that interest 5.98% rate your monthly payment towards principal and interest is $1033.81 (no idea what your taxes/insurance/etc are) and you will spend $8528.45 in interest over those 5 years.

If you refinance at 15 year rates, and spend that $1500 closing costs out of pocket, the monthly payment to pay it off in 5 years would be $958.95, as savings of just about $75 a month. At the end of those 5 years you will have paid $4036.96 in interest.
If you took that extra $75 a month and put that as extra towards your mortgage, you will pay it off about 4 months early and save $314 in interest.


If I were looking at doing this, I would figure out exactly how much closing costs would look like. If they are in the thousand dollar range, I would do it.

 

[DesiPower]

$55K @5.98 for 5 years...$63.3K

@3.5% for 5 years...$60K

Save $3K on interest to be eaten up by costs/fees/closing. You'd have to total all the fees up.


3.25%...$59.6K

This,

/thread

 

[Elbryn]

if you were serious about paying off in 5 years, take a look at penfed's 5/5 arm @ 2.675%
https://www.penfed.org/55-ARM-Promotion/?intcid=ad-55ARM-home-mainAd-02212013

rate changes at year 5,10,15,20,25. max 7.75% rate with cap 2% per 5 year cycle.

plus they are running promo now for closing cost credits (see fine print) and 1st payment free in the form of closing credit. will need to pay .75 point for the 2.675 rate but at 55k is only about 400 bucks.

55k @ 2.675 drops payment monthly to about 225 a month before insurance/taxes etc.. though i'd recommend not escrowing and paying taxes/insurance on your own. if you can afford to do 1k mortgage payments before escrow you can be out in 5 years.

 

[jaedaliu]

You gotta do the legwork (fingerwork?) because mortgage companies can only give loans for specific states. Elbryn's idea is good, an ARM that gives a low initial percentage will serve you well because you're paying off quickly irrespective of negotiated loan length.

Maybe try bankrate.com? They'll give you a list of lenders for your state.

 

[mizzou]

I currently have about 55k left on my home mortgage @ 5.98% interest (ouch!) My credit score at last check is 812. Is it work paying all of the costs to refinance? If so, who would you recommend without a bunch of gimmicks? I really dont want to do biweekly payments or automated withdraw or any of that.

my mortgage company offered a (OK federal gov't sponsored) refinance with FREE closing costs/ etc. etc. just as long as you met the requirements. Can't remember the name of the program.

Anyway, the rate was about .5% higher then the market rate, but I went from a 6% to a 4%.

If you are concerned if the closing costs are too much, it's easy, just do the math.

Figure out how much it would cost completely to refinance, then figure out how much savings you would have each month if you went through with it.

Just take those numbers and then figure out at what month you break even. If the $$ you save doesn't materialize, then its not worth it.

 

[highland145]

Another thought.....let's say you can't pay it off in 5 but take 10 years. That's ~$72K at your current rate and ~$65K at 3.5%. So even if the refi costs breaks even now, you'll be ahead if the 5 year plan doesn't pan out and it takes longer.

 

[DaWhim]

How much equity do you have in the house?

Penfed has 1.99% 5 years for home equity loan, get the loan, pay off your mortgage. now u have a 5 years loan at 1.99% to pay off.

the cost is a lot higher doing a refinance than taking out a home equity loan.

 

[Red Squirrel]

When does it open? If it's in the next year or so may be best to just tough it then wait till then to renegotiate a better rate. Just be sure you keep your credit up, you have good credit so I can't see why they can't give you something better just be sure to keep it that way till you go see them.

I'd start with sticking to the same bank, and asking them what they can do for you, and if they can't bring it low enough you will look at switching. Also ensure that if there's a penalty it's worth paying it. Normally the banker will figure this out for you. Schedule an appointment so you can go sit down with someone for like half an hour or so to figure everything out. You'll probably have to sign stuff anyway, so it's easier to do it more formally.

Also why don't you want automated withdraw? I can't imagine having to manually pay bills, especially a mortgage. That's a pretty big risk to take. You can forget, get sick etc.. or other situation where you can't go out to mail the check. Weeks go by so fast these days, it's easy to forget stuff like that and lose track. Bi weekly is also more convenient I find as I just have it come out at the same time as my pay check. Most banks will give you that option. I wish all services had that option, actually. I'd make everything biweekly and come out right after my pay check.

 

[dullard]

Bi weekly is also more convenient I find as I just have it come out at the same time as my pay check. Most banks will give you that option. I wish all services had that option, actually. I'd make everything biweekly and come out right after my pay check.

Bi-weekly is quite convenient on two conditions: (1) you are actually paid bi-weekly, as many of us are paid monthly. Imagine the horror if you are living paycheck to paycheck and your company switches you to monthly payments right before a 3-payment mortgage month comes along. (2) You can afford to pay a lot more per year.

But the OP is correct that bi-weekly is a gimmick. Yes, you can pay off a loan faster and paying off this type of loan faster saves interest. But you are paying it off faster because with bi-weekly payments you are paying 8.33% more per year than you would with monthly payments (12.5% more on the unlucky years when your first payment happens to be due Jan 1 or leap years when your first payment is due on Jan 2). It is the extra principal that you are paying each year that shortens it and saves interest - not the gimmicky bi-weekly part.

Plus, you can always pay more principal if you want with a monthly payment and get the loan paid off sooner.

 

[dullard]

I currently have about 55k left on my home mortgage @ 5.98% interest (ouch!) My credit score at last check is 812. Is it work paying all of the costs to refinance? If so, who would you recommend without a bunch of gimmicks? I really dont want to do biweekly payments or automated withdraw or any of that.

With those numbers, I'd look into doing three options:

1) A no-fee refinance if you can find one. Not a fee-hidden-and-rolled up into your new loan, but a true no-fee refinance. They are rare but do exist at times. If you can find one, it is a no-brainer to do it.

2) Get a different loan, such as a home-equity loan. That assumes you have home-equity and that you can find a lower interest rate.

3) Just pay your current mortgage off quickly. If you can afford to pay $1063 / month (plus taxes and insurnace) then you will pay off your current loan in 5 years.

As to where to go, it doesn't matter. They are all basically the same. If one bank gets you the deal you need, take it.

 

[Red Squirrel]

Bi-weekly is quite convenient on two conditions: (1) you are actually paid bi-weekly, as many of us are paid monthly. Imagine the horror if you are living paycheck to paycheck and your company switches you to monthly payments right before a 3-payment mortgage month comes along. (2) You can afford to pay a lot more per year.

But the OP is correct that bi-weekly is a gimmick. Yes, you can pay off a loan faster and paying off this type of loan faster saves interest. But you are paying it off faster because with bi-weekly payments you are paying 8.33% more per year than you would with monthly payments (12.5% more on the unlucky years when your first payment happens to be due Jan 1 or leap years when your first payment is due on Jan 2). It is the extra principal that you are paying each year that shortens it and saves interest - not the gimmicky bi-weekly part.

Plus, you can always pay more principal if you want with a monthly payment and get the loan paid off sooner.

Yeah that's the plus side, you pay more on it throughout the year without it really being much of an impact. Did not realize some people got paid monthly though, in that case yeah it would be better to stick to monthly (which is easy to do anyway). Just increase the payments a bit to compensate. Can do that with biweekly too anyway, that's what I do.

I have a rule of thumb, I treat $1,000 like 0. Basically I try to keep my balance at $1000 after my pay check. If I need to move money anywhere such as pay off the credit card, or buy something, I don't go lower than $1000. At night the mortgage comes out ($550) and that leaves me with a minimum of $450 for 2 weeks, for any other bills that come out. End of month I try to keep more in the account because the city taxes alone are about $400 and come out during the last week.

When I buy something I don't need I only do so if all my credit is paid off, and my bank account has >=$1000, or I'm a few days away from my pay check and figure the odds of a bill coming out is slim. I try to buy stuff on my credit card that way I keep the balance in my bank, then pay off the card when I get paid. I do have overdraft but I try to avoid depending on it as the interest is not that great, it's not really made for long term, it's more to protect you from getting a credit hit if the balance is too low.

Though really I need to stop buying things I don't need, period, and save up more. I will admit I rarely hit that $1000 mark for a long time. I make good money so I have no excuse.