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Profile picture for dodsonfrontlawn

Should I refinance my mortgage? It's a 15yr fixed at 5%, and I'm 8yrs into it.

  • October 18 2010 - Portland
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Answers (15)

Best Answer

Profile picture for Mills Realty
Depends on what your goals are.  Since you only have 7 years left any comparisons should be done with you paying off the new loan in the same period of time.  Then you will be able to see the true cost of the re-fi and make an informed decision.
  • October 18 2010
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So rather than just guess the answer to your question I prepared a sample analysis for you to look at.  I took a 7yr old 5% 15 yr fixed loan for 150,000 (?) and compared it to a 10 yr fixed refinance (col 2) and to the same 10 yr fixed with the savings of $256 per month added to principle.

As you'll see from the report below if you apply the same payment you'll simply pay the loan off in exactly the same time frame as you are now.  If you have to pay closing costs to get the same result then that's not a good deal.

If however, you are looking for better cash flow you will save $256 per month today (and for the next 8 yrs) by refinancing to a 10 yr and keeping the difference to save/invest or pay off other debt.  Granted you'll have two additional yrs of payments but the total interest cost on the new 10 yr is actually $500 less over that 10 yr period so the true cost is really a wash.

Finally, I realize that I don't know your original loan amount so these numbers will be either reduced or magnified by your actual loan amount but the relative savings should be accurate.

Here's a link to the report: http://edge.mortgagecoach.com/report/edgereport.html#11332-0-0-234

Glad I can be of help.  Feel free to contact me with any questions.
  • October 27 2010
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The only way it would make sense to me is if you could refinance into a 10 year or 5/1, 7/1 (15 years) and throw all savings from the new loan into principal reduction so the loan pays off in the same time frame.  You have already paid most of your interest on your loan and are turning the page to be paying mostly principal reduction.  It you are comfortable with the payment and can afford it, you might just keep your current loan and make additional payments so you save thousands off the interest.  Check out an amortization calculator to see what an additional $100 or $200 a month will do for paying off your loan.  I think you will be pleasantly surprised on how fast you could be mortgage free.  Best to you!
  • October 26 2010
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well, lets try actual calculations. I will use a current debt of $100K, you can scale it to whatever value you like.

at 5%, 7 years to go:
payment (PI) = $1407.52
total to pay = $118231.68

refi to 5 year arm at 3.25%, pay it off in 5 years!
payment (PI) $1803.12
total to pay = $108187.20

refi to 15 year at 3.75%, pay off in the same 7 years..
payment (PI) = 1351.
total to pay = $113509

So, scale that, and see if it makes sense. Obviously, if the debt is a lot smaller, or the fees to get the loan too excessive, it won't make sense.
  • October 26 2010
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Wow!

Numbers don't lie.  Do the numbers, they'll tell you what to do.

There are a few answers here that hit home.

Good stuff!
  • October 26 2010
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I think the suggestions that say NO are correct if you like where your principle is at right now because the lower rate won't make as much difference at this point.

  • October 26 2010
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Profile picture for openup
No, you are paying more principle than interest at this point. I am not sure what refinancing from 5% TO 4% will do for you. 

Closing costs and upfront interest and extending your term doesn't make sense to me.

Take that money you would pay in extra interest/fees and make extra payments to your principle.


  • October 26 2010
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Go for a 7 or 10 year program and apply your savings to the priciple balance in order to have the loan make sense.
  • October 26 2010
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Rates are awesome and It's likely worth haveing a good lender put the numbers together for you. While none of us have a crystal ball, my strategic lender partner believes the rates will drop in the high 3s by the end of the year. We are in the midst of refinancing our home.  In our situation we can wrap our equity line of credit with our first, get the same payment and more will be applied to principal.It will be worth it.Our lender was able to give us 4 3/8, NO POINTS!  Call me if you want a dynamite lender.  [phone removed by Zillow moderator]. Cheers ~ Noelle
  • October 26 2010
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No. You're at a point in the amortization schedule where your payment is starting to seriously reduce the principal balnce of the loan. If you refinance, the cycle starts anew, and all but a dollars of your new payment will pay interest.

Besides, the interest rate differential isn't enough to warrant paying loan closing costs. In effect, these costs add to the cost basis of your home. And be sure to examine "no closing costs" loan programs very carefully. Those costs are incurred and you will be paying them somewhere, most likely with a slightly higher interest rate.
  • October 19 2010
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Try to get a 10-yr fixed at no cost.
  • October 19 2010
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It is depended on the closing cost, it is good if the closing cost is $1,000 or less per $100K mortgage at 3.75% interest rate for 15 years term.

  • October 18 2010
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Profile picture for Tim T Wells
You might want to look into a no-closing cost option. 
  • October 18 2010
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Profile picture for shapiroamg
Not knowing what your payment, original balance and current balance makes answering harder. Couple things to consider:
-how long do you plan to be in the property?
-Are you looking to reduce your monthly payment at the expense of tacking on years to your loan?

Depending on your answer, a 10 yr fix or going back to a 15 yr might be worth looking into.
  • October 18 2010
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Profile picture for daveskow
loan amt ?
value ?
type of new loan desired ?
credit ?
can you qualify?
do you need to lower payment or do you watn to get loan paid off asap?
  • October 18 2010
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