Answers (7)
- T.C. Whiting, "TCW at your service"
- Contributions:431
The fast answer is...It totally depends on your individual circumstances. Those rules of thumb about .5 or .75 or 1.0 are just that. Rules of thumb and not based on a specific set of circumstances. They make many assumptions.
Are you looking at a 30 year payoff? Or will you sell the home in a few years? Or will you pay it off in 10? (if either of the later two, you might consider an ARM for a greater monthly savings). If you will pay it off in 30 years, how many years into the current loan are you--and more importantly how much interest have you already paid? What are the costs of the refinance?
Add up how much you have already paid in interest on your loan (add in another 60 days worth to be safe) and then add in the closing costs. Lets call that number "Sunk Costs"
Now, take the savings you get from that .37 which is probably about $90/mo. $90 times 360 payments (30 years of payments) is about $32,000 that you will save in lower payments. Lets call this number "Savings."
Sunk Costs - Savings should give your answer.
I'm sure you can see if you had already paid down $50,000 in interest then, this would be a bad proposition.
Another thing to consider. See what it looks like going to a 25 year amortization. Then you don't have to start over again (if you are less than 5years in that is). Feel free to get in contact with me for a more in depth analysis.
Are you looking at a 30 year payoff? Or will you sell the home in a few years? Or will you pay it off in 10? (if either of the later two, you might consider an ARM for a greater monthly savings). If you will pay it off in 30 years, how many years into the current loan are you--and more importantly how much interest have you already paid? What are the costs of the refinance?
Add up how much you have already paid in interest on your loan (add in another 60 days worth to be safe) and then add in the closing costs. Lets call that number "Sunk Costs"
Now, take the savings you get from that .37 which is probably about $90/mo. $90 times 360 payments (30 years of payments) is about $32,000 that you will save in lower payments. Lets call this number "Savings."
Sunk Costs - Savings should give your answer.
I'm sure you can see if you had already paid down $50,000 in interest then, this would be a bad proposition.
Another thing to consider. See what it looks like going to a 25 year amortization. Then you don't have to start over again (if you are less than 5years in that is). Feel free to get in contact with me for a more in depth analysis.
- Nic Netherton, "Colorado Lender"
- Contributions:7324
What rate do you have now? How much equity? FICO score?
Tell us a bit more about your situation and perhaps we can help you with the decision.
Tell us a bit more about your situation and perhaps we can help you with the decision.
- radinsmore
- Contributions:2
What I just heard from a number of phone calls is that financing typically does not make sense unless you can save 3/4 to 1%. The loans I see carry refinance fees that are too high and increase my balance. I've decided therefore not to refinance at this time.
Thanks for everyone's answers...they've been very helpful.
R. Dinsmore
Thanks for everyone's answers...they've been very helpful.
R. Dinsmore
- Nic Netherton, "Colorado Lender"
- Contributions:7324
.375% is not much of a savings in rate if there are costs involved with the refinance. Is this a no-cost offer? What rate and terms are being offered to you?
Rates are awesome today so now is the time to evaluate your options.
Rates are awesome today so now is the time to evaluate your options.
- David Widlund
- Contributions:248
It makes sense when you can better your position without increasing your balance significantly. Or, if you can significantly reduce the term of your loan with minimal expense.
It's surprising how easy it is to go to a 15-yr loan from a 30-yr loan if you have paid a few years. The rates today are so low that you need to do a little poking around.
Good luck!
It's surprising how easy it is to go to a 15-yr loan from a 30-yr loan if you have paid a few years. The rates today are so low that you need to do a little poking around.
Good luck!
- shapiroamg
- Contributions:3136
Depends on the monthly savings and the costs. If the lender/broker can cover the costs with a credit, then its probably worth doing. To get a better opinion let us know the following:
orig loan amount
current balance
current rate
estimated current value
orig loan amount
current balance
current rate
estimated current value
When should you refinance? What is the trigger point in interest savings? 1/2%?
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