To Refi, or not ?

[planegray]

Refi questions;

To refi or not, that is the question. I know that the “correct” answer varies according to the wants and needs of the borrower, but it can be confusing to figure out which alternative is the best.

So, here’s the scenario, all figures have been rounded off, and are not exact.
30 year loan started 15 years ago, 6.5% interest, $350K borrowed, $2,200.00 monthly payment
Option 1; do nothing
Option 2: refi with Harp, get 3.5%, loan amount $330K, payment $1,200.00, 30 year loan (no cash out)

Question 1; How dumb is it to give up on the interest already paid on the original loan, and have to pay it all over again ?

Question 2: is having lower payments worth adding another 15 years to the payoff of the house ?

 

[mikev]

What if you refi to a 15 year?

 

[Cycle61]

What if you refi to a 15 year?

This.

 

[planegray]

good question, I'll check it out. Payments a little lower I think

edit: My tendency is to get the 30yr loan and make the 15yr payment amounts... it gives me budget flexibility

 

[UDRider]

good question, I'll check it out. Payments a little lower I think

edit: My tendency is to get the 30yr loan and make the 15yr payment amounts... it gives me budget flexibility

What does No Cash out means?
Does it mean you can't pay it off early?

Also last time I refinanced it was of what was remaining on the loan...

 

[oobus]

I got a 15 for 4.125% a few years back, had been with a variable that was lower. Ended up paying $600+ more per month, but I don't want to have a house payment when we are in our 60's. No prepayment penalty.
Will be paid off in 11 years than we can say to whoever we want and not have worries when we are :afm199

 

[planegray]

What does No Cash out means?
Does it mean you can't pay it off early?

Also last time I refinanced it was of what was remaining on the loan...

No cash out means I'm only financing the loan balance, on not taking out cash ( to buy a Ducati, or a boat, or some other money pit :laughing )

I would never get a loan with a prepayment penalty :x

 

[AbsolutEnduser]

Refi questions;

To refi or not, that is the question. I know that the “correct” answer varies according to the wants and needs of the borrower, but it can be confusing to figure out which alternative is the best.

So, here’s the scenario, all figures have been rounded off, and are not exact.
30 year loan started 15 years ago, 6.5% interest, $350K borrowed, $2,200.00 monthly payment
Option 1; do nothing
Option 2: refi with Harp, get 3.5%, loan amount $330K, payment $1,200.00, 30 year loan (no cash out)

Question 1; How dumb is it to give up on the interest already paid on the original loan, and have to pay it all over again ?

Question 2: is having lower payments worth adding another 15 years to the payoff of the house ?

there are calculators for that.

yes indeed, it turns out that at some point there is no point to refinance because you've already paid too much on interest.
You need precise values to figure out z break out point. There is a definite break even point if you had "a 30" and you're doing "a 30" again, after which your resulting savings turn negative.

http://www.bankrate.com/calculators/mortgages/home-refinance-interest-savings-calculator.aspx

 

[wazzuFreddo]

15 yr loans are around 2.75% right now.

 

[Holeshot]

I don't understand Steve. Running an amortization table, the $350K loan should be paid down to around $250K. Why is it at $330K? Previous re-fi?

 

[Cycle61]

15 yr loans are around 2.75% right now.

Damn

 

[planegray]

I don't understand Steve. Running an amortization table, the $350K loan should be paid down to around $250K. Why is it at $330K? Previous re-fi?

Yeah, I really need the actual amounts.... I tend to fog over on that stuff... ignorance/bliss (no prev refi )

there are calculators for that.

yes indeed, it turns out that at some point there is no point to refinance because you've already paid too much on interest.
You need precise values to figure out z break out point. There is a definite break even point if you had "a 30" and you're doing "a 30" again, after which your resulting savings turn negative.

http://www.bankrate.com/calculators/mortgages/home-refinance-interest-savings-calculator.aspx

THANK YOU !!11 :banana :banana

 

[Holeshot]

15 yr loans are around 2.75% right now.

Great rate. @4% for 30 years, I'd rather borrow cheap money for longer...

but 2.75% is enticing.

 

[Ogier le Danois]

Refi questions;

To refi or not, that is the question. I know that the “correct” answer varies according to the wants and needs of the borrower, but it can be confusing to figure out which alternative is the best.

So, here’s the scenario, all figures have been rounded off, and are not exact.
30 year loan started 15 years ago, 6.5% interest, $350K borrowed, $2,200.00 monthly payment
Option 1; do nothing
Option 2: refi with Harp, get 3.5%, loan amount $330K, payment $1,200.00, 30 year loan (no cash out)

Question 1; How dumb is it to give up on the interest already paid on the original loan, and have to pay it all over again ?

Question 2: is having lower payments worth adding another 15 years to the payoff of the house ?

Run the amortization tables and it should
Become pretty clear in short order.

The over issue is PMI, will you be stuck with PMI for longer (like an FHA loan 5 year period) or no?

 

[Mr. White]

Refi with a 30 yr. Pull out all your equity. Buy all the things!! You need giant boat. And a few more motorcycles. arty :flag

 

[wazzuFreddo]

Great rate. @4% for 30 years, I'd rather borrow cheap money for longer...

but 2.75% is enticing.

A refi at 2.75% would knock 10 years off my mortgage with the same monthly payment. No brainier not to give the bank 10 years of free money.

 

[SteelerFanatic]

I did the 30 down to 15 refi 2 years ago. Best thing ever, now I am on track to have it paid off earlier than my original 30. (bought in 2001)

Even looking at refi'ing and going back out to 15 more years gives me the cold-sweats. I want a 10yr loan. lol

All the income flexibility is great, but having no mortgage is the best!

 

[250mL]

+1 to what Holeshot said about your remaining balance.

I used the below logic to guide my decision to refi a few years ago into a 3.25% 30yr. I was only 2 years into the original loan, so saving over a percentage point made lots of sense.

Someone like yourself who is 15 years in has already paid a large sum of the interest, so you would need to take a closer look...

Option A:
Do nothing. $350,000, 30yr @ 6.5%, payment of $2200:
If you've paid on a normal schedule for the last 15 years, you've paid off $96,000 of the principle, so should only have $254,000 balance left.

You would have already paid $302,000 in interest. If you continue to pay on schedule, you will put in another $144,000, for a grand total of $446,000 of total interest.

The house will ultimately cost you the $350,000 original loan plus the $446,000 interest = $796,000 total cost (original loan + interest)

Option B:
Refi assumed balance of $254,000 for 30yrs @ 3.5% equates to $1140 monthly:
You've currently paid off $96,000 of the principle and another $302,000 interest, so at this point you've got $398,000 spend on the house.

The refi of $254,000 will cost you $156,000 in interest. For a total of $410,000 to close out the refi.

Grand total of $398,000 (spent to date) plus the $410,000 (30yr refi) is $808,000.

Option C:
Assume you apply for the 30yr @ 3.5%, but pay your current $2,200 per month (normally $1140):
141 months (~12 years) to pay off $254,000 at a cost of $56,000 interest = total of $310,000 to close out the refi.

$398,000 spend on the house to date.

Grand total of $398,000 (spent to date) plus the $310,000 (30yr refi) = $708,000

Option D:
15yr refi @ 2.75% equates to a $1723 monthly payment:
$254,000 balance + $56,000 interest = $310,000 to close out 15yr refi

Grand total of $398,000 (spent to date) plus the $310,000 (30yr refi) = $708,000

Option E:
15yr refi @ 2.75%, but but pay your current $2,200 per month:
134 months (11.25 years) to pay off $254,000 balance + $41,000 interest = $295,000 to close refi.

Grand total of $398,000 (spent to date) plus the $295,000 (15yr refi) = $693,000

 

[planegray]

+1 to what Holeshot said about your remaining balance.

I used the below logic to guide my decision to refi a few years ago into a 3.25% 30yr. I was only 2 years into the original loan, so saving over a percentage point made lots of sense.

Someone like yourself who is 15 years in has already paid a large sum of the interest, so you would need to take a closer look...

Do nothing. $350,000, 30yr @ 6.5%, payment of $2200:
If you've paid on a normal schedule for the last 15 years, you've paid off $96,000 of the principle, so should only have $254,000 balance left.

You would have already paid $302,000 in interest. If you continue to pay on schedule, you will put in another $144,000, for a grand total of $446,000 of total interest.

The house will ultimately cost you the $350,000 original loan plus the $446,000 interest = $796,000 total cost (original loan + interest)

Refi assumed balance of $254,000 for 30yrs @ 3.5% equates to $1140 monthly:
You've currently paid off $96,000 of the principle and another $302,000 interest, so at this point you've got $398,000 spend on the house.

The refi of $254,000 will cost you $156,000 in interest. For a total of $410,000 to close out the refi.

Grand total of $398,000 (spent to date) plus the $410,000 (30yr refi) is $808,000.

Assume you apply for the 30yr @ 3.5%, but pay your current $2,200 per month:
141 months (~12 years) to pay off $254,000 at a cost of $56,000 interest = total of $310,000 to close out the refi.

$398,000 spend on the house to date.

Grand total of $398,000 (spent to date) plus the $310,000 (30yr refi) = $708,000

15yr refi @ 2.75% equates to a $1723 monthly payment:
$254,000 balance + $56,000 interest = $310,000 to close out 15yr refi

Grand total of $398,000 (spent to date) plus the $310,000 (30yr refi) = $708,000

MOre awesome info ! :banana

Thank you so much .... I'm going to find some mortgage calculators and plug the numbers in and see what comes out. Your overview with real numbers is an eye opening lesson :hail

 

[teg916]

Refi questions;

To refi or not, that is the question. I know that the “correct” answer varies according to the wants and needs of the borrower, but it can be confusing to figure out which alternative is the best.

So, here’s the scenario, all figures have been rounded off, and are not exact.
30 year loan started 15 years ago, 6.5% interest, $350K borrowed, $2,200.00 monthly payment
Option 1; do nothing
Option 2: refi with Harp, get 3.5%, loan amount $330K, payment $1,200.00, 30 year loan (no cash out)

Question 1; How dumb is it to give up on the interest already paid on the original loan, and have to pay it all over again ?

Question 2: is having lower payments worth adding another 15 years to the payoff of the house ?

Question 1: Don't look at it as giving up interest already paid. If you don't refinance, you will pay 6.5% on the amount you owe now, as opposed to paying 3.5% on the amount you owe now.

Question 2: In my opinion, hell yes! If you owe $330K, lowering your interest rate by 3% will save you almost $10K in interest in the first year alone.

My strategy, would be to get the 30 year loan, and keep paying what you are paying now. That way, even though you have a 30 year loan, you will pay it off pretty close to when you would have before you refinanced. This gives you greater flexibility than a 15 year loan, because if you temporarily lose your job, you can always fall back to a lower payment while you get back on your feet. A 15 year loan will get you an even lower interest rate, but it is higher risk.