Home refinancing tips...anyone?

[BillyIdol]

With the advent of lower interest rates, I'm thinking about refinancing. I want to do this in an educated, systematic way, but this is not my forte.

Loan balance 273k at 5.5%. Owner occupied home (me).

Seems like refi can be done at 5.0% or maybe lower?

I'm in So. Cal. near Pasadena.

1-How do you determine when it is worth it to refinance?
2-How much do you need to "save" to make it worth it?
3-Should I look into 15 year mortgages?
4-What is APR? It seems like "the interest rate" but I know it is different.
5-How do I avoid junk fees?
6-Who could you suggest to refi through that would be the best deal? The loan is through Country Wide and I bank with B of A.


Thanks in advance!
John

 

[eddiensx]

You should consider a refi if you can recover the cost of the transcation within 24 months. If you plan on staying in the house for a long period of time it is worth it.

If you plan on selling in a couple of years, you might not want to refi.

The APR is the interest rate, plus fee's, this is extrapolated into the actual interest rate you are paying. If you have a 30 year mortgage, there shouldn't be a big difference in numbers.

Lets say on 275k at 5.5% your P/I payment is approximately $1,561.42. At 5% the payment is approximately $1,476.26. This is a savings of $85.16 monthly. If you are paying fees of $4k, not including insurance and tax impounds, it would take you 47 months to recoup the fees.

The average person stays in their house for 7 years, so it's kind of a tossup.

If you plan on staying for 30 years, you would save $25,548.00 over the remaining 25 years.

15 year mortgages are typically lower than 30 year loans. A 15 year loan is probably at 4.875. The payment difference is $680.55. Or you could take the $680.00, long term average return of 6% and in 15 years you would have a side account with $190,000.00, plus the house. Odds are you could pay the house off with the cash and have money left over.

Depending on your tax bracket you have to figure the effective rate of interest you are paying. If you are in a 20% Federal and a 5% state tax, you would effectively be paying 3.75 on the money. Long term inflation is averageing slightly over 4%. You are effectively getting the money for less than inflation, which in this case is a -.25%. inflation adjusted interest rate. That is why some are saying the real interest rates are below 0%.

Hope this helps. I'm not a mortgage broker, but I am a CFP, so I do this stuff in my sleep.

By the way, Countrywide and BofA are now the same company. BofA bought them a few months ago.

 

[poncekim]

With the advent of lower interest rates, I'm thinking about refinancing. I want to do this in an educated, systematic way, but this is not my forte.

Loan balance 273k at 5.5%. Owner occupied home (me).

Seems like refi can be done at 5.0% or maybe lower?

I'm in So. Cal. near Pasadena.

1-How do you determine when it is worth it to refinance?
2-How much do you need to "save" to make it worth it?
3-Should I look into 15 year mortgages?
4-What is APR? It seems like "the interest rate" but I know it is different.
5-How do I avoid junk fees?
6-Who could you suggest to refi through that would be the best deal? The loan is through Country Wide and I bank with B of A.


Thanks in advance!
John

John. go with indymac. They basically have no cost refi's below 5% right now. Some lucky people locked in a couple days ago at 4.7% with negative points credit. Obviously, at no cost, it's a no brainer.

I suggest you head over to this thread for more detailed information.

http://www.fatwallet.com/forums/finance/788032/

 

[sahtt]

2nd to the above. 5.5% is not a bad interest rate. Make sure you run the numbers, you are going to be close unless you get ~4.5%. My dad is heavy into the title insurance/refi business, I know way too much about the scams and industry bs involved.

He usually knocks off 2 grand per refi in fees/junk when he accompanies a family member during closing (average house, 150-250k in TX). He used fo work for the insurance department and wrote a good portion of the rules still in existence today as many were derived in TX during the crisis in the 80's when he was there.

 

[PHOEN$X]

John. go with indymac. They basically have no cost refi's below 5% right now. Some lucky people locked in a couple days ago at 4.7% with negative points credit. Obviously, at no cost, it's a no brainer.

I suggest you head over to this thread for more detailed information.

http://www.fatwallet.com/forums/finance/788032/

What a coincidence.

I'm currently at 4.99% on a 10yr loan, and spoke with a rep last night (left a message around noon and finally got a callback 7 hours later; guess they're pretty swamped). Got a quote for 30yr fixed at 4.75% with -0.65 point credit, or 4.5% with (effectively) -0.06 point credit. Closing cost around $2400 before the credit, so break even is around 1yr compared to what I have now, plus the payment drops to around 45% of what I'm paying now. I just need to decide if I want to roll the closing costs into the mortgage (which may save me if rates go down even lower and I refi again), or pay it up front with cash on hand.

Waiting to get a callback from him today, as he locked it in last night and said he would call to take my non-refundable $290 deposit today.

 

[Daedalus]

I think rates will go lower, so I would roll it. It's cheap money either way, and the govt is pulling out all the stops to keep people from walking away from their mortgages.

 

[steveny]

I think rates will go lower, so I would roll it. It's cheap money either way, and the govt is pulling out all the stops to keep people from walking away from their mortgages.

They can offer rates rates at 0% but until they allow refi's for people who are upside down they aren't fixing anything.

 

[Semnos_NSX]

Man, what a perfect time for this thread! Just this past Wednesday I was watching the news and a “money expert” came on talking about how now is the time to consider refinancing your home if you’re looking to save some money. I thought, “Hey, I’m always looking to save money!” So I called my current lender and asked what kind of interest rate could they give me if I refinanced? To make a long story short, they initially offered me a 30 year fixed for 4.875% but after they found that my credit score was 800+ they said they could do it for 4.750%. This would be a significant savings on my monthly payment and I would recoup the refi charges in less than a year so I said let’s do it!

Now, here is the part where I am completely confused and hope to have some of you experts out there clear it up. The lender told me that they could go ahead with the refi IF I have at least 5% equity in my house and they are going to send an appraiser out to verify that! Why does my house have to have at least 5% equity in it for me to qualify for the refi? This makes no sense to me! With the housing market the way it is, I’m sure that VERY few people have positive equity in their house. I’m one of the people who actually make their house payment and not just walk away from it like so many are doing. Why am I being penalized and not allowed to refi for doing the right thing????

Is this normal practice for lenders who refinance homes???

**sorry if I sort of hijacked this thread, but the information may be useful….

 

[PHOEN$X]

The lender told me that they could go ahead with the refi IF I have at least 5% equity in my house and they are going to send an appraiser out to verify that!

Consider yourself lucky. I think most banks require 75% LTV (that's 25% equity) to get that low of a rate.

 

[Daedalus]

They can offer rates rates at 0% but until they allow refi's for people who are upside down they aren't fixing anything.

Right, and since the government owns the GSEs, guess what happens next? The government will enact measures progressively after, and only after, the previous measure is deemed a failure. Debt forgiveness will likely be the ultimate barrier, but I don't think anything else will keep people from walking. As soon as people realize they may be underwater for a couple decades, they will quit putting half their income toward a mortgage, and rent a place for a lot less. Too many people were making financial decisions on the flawed assumption of continued appreciation.
Depending on how the govt goes about it, even forgiveness of debt may not be enough. We should all fear the government's ability to find unintended consequences.

 

[steveny]

Man, what a perfect time for this thread! Just this past Wednesday I was watching the news and a “money expert” came on talking about how now is the time to consider refinancing your home if you’re looking to save some money. I thought, “Hey, I’m always looking to save money!” So I called my current lender and asked what kind of interest rate could they give me if I refinanced? To make a long story short, they initially offered me a 30 year fixed for 4.875% but after they found that my credit score was 800+ they said they could do it for 4.750%. This would be a significant savings on my monthly payment and I would recoup the refi charges in less than a year so I said let’s do it!

Now, here is the part where I am completely confused and hope to have some of you experts out there clear it up. The lender told me that they could go ahead with the refi IF I have at least 5% equity in my house and they are going to send an appraiser out to verify that! Why does my house have to have at least 5% equity in it for me to qualify for the refi? This makes no sense to me! With the housing market the way it is, I’m sure that VERY few people have positive equity in their house. I’m one of the people who actually make their house payment and not just walk away from it like so many are doing. Why am I being penalized and not allowed to refi for doing the right thing????

Is this normal practice for lenders who refinance homes???

**sorry if I sort of hijacked this thread, but the information may be useful….

Yep that is how it works and if they don't change the LTV they aren't going to fix anything.

I just looked at a lake house I think I am going to buy. The lender is looking for 5% down and 4.75% for the paper. The deals are excellent right now. However if the borrower is upside down the deals are not going to help the problem as a whole. The fed needs to step in with the TARP money and cover the gap between the actual value and the principle on the note.

Say someone owes 300k on a 180k house. Have the bank write paper on the first 180 and then have the TARP write paper on the 2nd for 120k and hold that paper at 3% or something like that. THEN wrap that paper up in a trade-able security divided up by FICO and IPO it on the exchange like an ETF. Pay a div that tandems with the risk according to the FICO in the tranche.

 

[Semnos_NSX]

Yep that is how it works and if they don't change the LTV they aren't going to fix anything.

I just looked at a lake house I think I am going to buy. The lender is looking for 5% down and 4.75% for the paper. The deals are excellent right now. However if the borrower is upside down the deals are not going to help the problem as a whole. The fed needs to step in with the TARP money and cover the gap between the actual value and the principle on the note.

Say someone owes 300k on a 180k house. Have the bank write paper on the first 180 and then have the TARP write paper on the 2nd for 120k and hold that paper at 3% or something like that. THEN wrap that paper up in a trade-able security divided up by FICO and IPO it on the exchange like an ETF. Pay a div that tandems with the risk according to the FICO in the tranche.

StevenY, where do I go to elect you as our next government official? I like the way you think!

 

[steveny]

StevenY, where do I go to elect you as our next government official? I like the way you think!

http://www.nsxprime.com/forums/showthread.php?t=110595&highlight=running+president

:biggrin::biggrin: