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Urgent: Need help on a Refinance Question

The interest rate on my 30 yrs. fixed mortgage is 5.25%, I spoke to a lender and they quoted 4.375% 30yrs fixed. Is this a good deal? or should I ask for a 4.25%

 Also is this a good time to refinance?

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August 24 2010 - Cary
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Profile picture for SoCal_Engr
Well, best of luck up in your neck of the woods - not that it sounds like you need it.  :-)
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August 24 2010
Socal,

It will only get worse as the Govt limits Loan officer compensation.  Loan Officers will have to simply close more loans to increase their income.  Unintended consequences, instead of trying to add value to potential clients the lo menatilty will be whats the quickest way to get these borrowers to commit to me, I need to close another loan!

The wrong folks are driving the bus and it will end UGLY!
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August 24 2010
Profile picture for SoCal_Engr
Andrew - That's kind of scary, but, sadly, way too understandable. It took me about 45 seconds to do the math on an Excel spreadsheet, which took me about 10 minutes to put together. That's not a big investment of time in order to be able to make an informed decision.
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August 24 2010
Because it is easier to sell people what they think they want, rather than educate them so they can make an informed decision.

I can't tell you how many folks has insisted on a 15 year mortgagte only to call a year or two later asking to go back to a 30 year term.
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August 24 2010
Profile picture for SoCal_Engr
Other than "lack of self discipline", why does it seem someone is always promoting the "benefits" of 15-yr notes?

$100K at 4.375% on a 30yr works out to a payment of $500/mth.
$100K at 4.000% on a 15yr works out to a payment of $740/mtht.
$100K at 3.875% on a 15yr works out to a payment of $733/mth.

If the 30yr note is paid at the 15yr payments, the 30yr...
  -v- 4.000% pays an additional $4K over an extra 6 months
  -v- 3.875% pays an additional $6.5K over an extra 9 month

But, the 30yr has an "option" of >$225/month in discretionary funds. So, how is the 15yr a better option if the borrower has some discipline and a sound financial plan?
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August 24 2010
I would urge you to consider switching to a 15 year note.  The rates will be significantly lower (below 4%) and you will be in better financial shape quicker if you can afford the additional payment.  Do the math and see how much more it would cost to cut your time owed in half.
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August 24 2010
Are you sure your loan is seasoned appropriately?

most lenders require you owning your home for a minimum 6 months in order to be eligible.
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August 24 2010
4.375% is a fantastic rate and it is a great time to refinance.  That being said, we typically recommend refinancing if our customers will receive a reduction in rate of 1% or greater.

Doing a simple calculation will help you determine whether it makes sense to refinance.  Take your current monthly payment (say $1,200) and subtract your new proposed monthly payment (say $1,150).  Divide the monthly savings into the total dollars it is going to cost you to refinance (let's use $3,000 in closing costs for this example).  The number you get is the total months it will take before you are at a break even point.

$1,200 minus $1,150 is a monthly savings of $50 divided into $3,000 in closing costs = 60 months or 5 years to break even.  If I were only a few years into my current mortgage and I was planning to stay in my home for 6+ years, then refinancing would make sense.  If I were not sure I would be in my home for the long term, I would not refinance.

You will also want to factor in how many more years you are extending your loan.  Are you 10 years into a 30 year fixed mortgage?  If so, then extending your term by 10 more years may not be a good idea.
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August 24 2010
Profile picture for chanpraddy
Principal bal : 200000
the loan was originated in 2010 and is just been 4months.
closing costs: $300
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August 24 2010
Now is a great time to refinance!

The general rule to refinance is try to lower your rate 1% to 1.5% to justify closing costs.  A refinance must show a benefit to you the borrower. 

You need to determine for yourself if this is a good deal. It's hard to make a determination without knowing the other facts of your loan.
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August 24 2010
what is the principal balance?
 
Closing costs?

how many years into current loan are you?

Yes it's  a great rate, but what other factors should you consider?

Rates shouldn't go much lower....
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August 24 2010
 
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