Prefer to talk in person? Find a mortgage specialist on Zillow
Profile picture for sek1313

I am on year 6 of a 30 year fixed with a 5.5% rate, considering 20 yr fix?

The extra details to the question, is I don't want to pay any extra fees or service charges to convert my current loan, which is in excellent standing.  Is this something I should even consider doing?

  • May 12 2010 - Bay Ho
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (8)

Interesting answers.........but it really boils down to how long you keep the loan vs 2% rule of thumb. 6 yrs. or more would make refinancing a good option. More than 9 yrs. would make it a great option. Your payment would be about the same but equity build up would be about $300 more monthly on a new 20 yr. loan, but you could make equation even better by continuing to make more than min. payment. You could also invest/pay off debt/increase 401K contribution etc. rather than putting more equity in property since you likely have good equity now.
  • May 15 2010
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Deciding whether or not you should refinance your home mortgage depends upon several factors. It also depends upon whether you are looking to simply reduce your monthly payment or if you are hoping to save money in the long run. I am making certain asumptions below but the numbers are probably close enough to give you an idea.

To understand your question better, let's look at an example. If your original 30 year loan was for $270,000.00 with a 5.500% interest, and you have already paid on it for 72 months, it will increase your monthly payment if you refinance for a new 20 years period with a 4.500% interest rate.

If your Federal tax rate is 26.000% and your state tax rate is 5.000%, you were probably paying $1,533.03 per month toward your home. When you refinance at the new rate, you will pay $1,549.09 instead, but your tax benefits will also be affected by this change.

The bottom line is:

1) you will lose $19,239.57 on tax savings (lesser tax benefit is worse)
2) you will pay off your loan 4 years sooner saving you about $65,918.43
3) closing your refinancing process will cost you about $2,500.00
4) Summing up these numbers, we can figure out your total refinancing BENEFIT will be about $40,323.56.

Hope that helps. I am happy to drill down to provide you with accurate numbers. Feel free to contact me.

  • May 14 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Tawny Lynn said "you should be able obtain a no cost loan (Costs covered by the rate) at a very reasonable interest rate."

There is no such thing as a no cost loan, you either pay upfront in the form of origination fees or you pay on the backend in for the form of a higher interest rate over the life of the loan (this winds up costing you more than paying origination fees).

Your best bet is to make extra payments on your existing loan.  If you're able to make bimonthly payments even better as you'll be significantly reducing the interest you'll pay over time.  Check with your current lender to see if they'll allow the bimonthly payments.

Frankly I'd stay with what you have.
  • May 14 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Without having additional information, it is hard to offer up a concise and definitive answer for you.  Information regarding the property itself would be needed, the details surrounding your loan specifically would need to be known, and more.  I suggest that you speak with a mortgage lender .. actually talk to them.  They will be able to collect all pertinent information needed to help you decide your best course of action.  Although the rule of thumb used to be if you could reduce your interest rate 1% or more, a refinance would be a good option ... there are so many more factors figuring into refinances these days.  Seek a knowledgeable, experienced lender to have a dialogue with.  If you need further info, please write again.  Best of luck to you moving forward with your decision.  
  • May 13 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sek1313
Thanks for the great answers.  I actually have just under $244k left on my original 30 year fixed, and do make additional principal payments each month.  Not sure if this is a good rule of thumb, but once heard if you can't lower your APR by 2 points, the refi is usually not worth doing. I will take a look at the amortization calculator and see what arises.  My initial analyses was to stay in the original loan, but these 15 and 20 year rates are appealing.
  • May 12 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

The answer really depends on your current loan amount. If, for example, your loan amount is about $400,000.00 then you should be able obtain a no cost loan (Costs covered by the rate) at a very reasonable interest rate. Some lenders are currently offering 20 year rates well below the 30 year fixed rates. Obviously, the 15 year fixed rates will be even lower. On the other hand, if your loan amount is only about $100,000.00 than refinancing will not likely benefit you. You would be better off, in this case, just paying a little extra principal towards your mortgage payment every month as this will greatly reduce the amount of interest you pay in the long run. If you want to reconsider paying some closing costs you could buy down your interest rate and save even more interest. An experienced mortgage broker should be able to show you detailed comparisons. Before you proceed with a refinance be sure and take a look at both your current loan's amortization schedule and an amortization schedule on the new loan.
  • May 12 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

sek,

Do the numbers on an amortization calculator. There's one on my website. Today's 20F rate is 4.500%. Staying with what you have or obtaining a new loan, both have a costs attached. See what makes more financial sense to you. .... Happy funding, Rudi
  • May 12 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

A good loan person can do the calculations, but here is what I think:

You may not significantly beat your current rate, so a rfi for that purpose may not pay off, or may have a long pay back.

If your objective is simply to pay off the loan sooner you can usually do that on your own by making additional principle payments.  Have a lender calculate how much additional you would need to pay each year to do a complete pay of in say, 15 years, using your current loan.  It mught be in the order of an extra one and a half to two payments per year, all marked, "apply to principle."  In this way there are no fees, no new title policy, no closing costs, and no pain, except for shelling out that additional money.
  • May 12 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.