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Replies (16)
what state are you in? and what is your loan amount? It would depend on closing costs, but typically I'd say a refi is worth it if you are dropping .5% or so in rate- and you'd be dropping a bit more than that these days!!! :)
oh, and it would be good to know what kind of loan we are talking about- 30 year fixed, 80% loan to value, conventional v. FHA.
- SoCal_Engr
- Contributions:5667
Wouldn't it also depend on "how big a loan" (i.e., the bigger the loan, the more impact on the payment)?
- Tammy Stockdale, "Colorado Mtg Broker"
- Contributions:6995
I agree with Socal, if it's a $100k loan, refi'ing for 1/2 is not worth it. If it's a $300k loan, it might be.
And my second question to teck was what? How many Q-tips he has in his bathroom closet??? ;)
- SoCal_Engr
- Contributions:5667
Jen,
By "how big", I was referring to the actual size of the loan docs. The extra ink required to print those higher rates on the gi-normous loan docs definitely has an impact on the number of trees left in the Amazon, and probably also impacts global warming.
- wayne lancaster, "funds2"
- Contributions:1177
Besides the amount of the loan and the loan program, a critical question is how long you plan on keeping the property. 4-5 yrs. or more would likely make decision to refi favorable.
- Steve Russell, "Steve Russell"
- Contributions:8
Here is the easy calculation:
- Find out how much it will cost you to refinance (actual closing costs, not escrows). This is typically about 2 to 3% of your loan amount depending on what state you live in.
- Take a look at what the new payment will be and how much you will save monthly.
- Take the cost of the refinance and divide by the amount you will save monthly and this will give you the number of months before you "break even" on the cost of the refinance.
If it costs you $3000 to refinance and you save $300 per month, it would take you 10 months to break even, then you are saving money beyond that point. This one would be a no brainer.
If it costs you $10,000 to refinance and you save $100 per month, it would take you 100 months to break even, and it would not make sense to pursue.
- George DeVine, "George DeVine"
- Contributions:857
Mtgmanfl,
So using your logic, if I took out a 30 year loan 10 years ago and can refinance into a 30 year fixed rate today and save $300 @ 3,000 in costs, I will break even in 10 months?
- Steve Russell, "Steve Russell"
- Contributions:8
George,
Can I get a side of sarcasm with my turkey please? My answer is directed at the specific question from someone who closed on the property less than 60 days ago. My post was not intended to be a "war and peace" explanation of all the intricacies of a refinance, and obviously someone who got a 30 year mortgage 10 years ago would be a completely different situation with a different answer.
- George DeVine, "George DeVine"
- Contributions:857
Touche
- Michael Yaeger, "yaegermike"
- Contributions:754
"If it costs you $10,000 to refinance and you save $100 per month, it would take you 100 months to break even, and it would not make sense to pursue."
I dont think you can make that decision for the borrower. If they stay in the loan for 8.4 yrs they save money and quite a lot more if they keep it for 30 yrs.
- John Paunan, "John Paunan"
- Contributions:1145
Do any of you guys have payment or title seasoning requirements for refinances after purchase? I've got bunches of borrowers, who just purchased, calling me to refinance to lower rates, but I know most lenders want either 12 months payment history or at least 6 months on title. Anyway, just wanted to throw that out there. I haven't been on the boards that much because with the shortened week it's been a mad dash to the end of the month.
- Paul McFadden, "pmcfadden"
- Contributions:143
You probably do have title requirements before you can refinance. Typically, it's six months minimum. Also, it probably doesn't make sense to refinance if you can't get a rate of at last 3/4-1% better. I was looking at a clients request the other day to refinance. They had a $400,000 mortgage. When we ran the numbers at 1/2% less the savings were only about $150/month. He was pretty sure he would be selling his home in another 4-5 years and, with anticipated closing costs of $5-10,000, it didn't make sense. We agreed that if the rate dropped another 1/4%, it would probably make sense. Good luck-I believe rates will stay low for the next few months.
- Allan Newman, "Sir Allan"
- Contributions:1231
If I were you I would find a broker to use provident funding for your loan. You will no doubt get 5.375% with no points so whatever the normal closing costs are . Its worth it yes.
closed mid october at 6.3% - what rate would make it worth refi
I closed mid october at 6.3 I see the rates keep dropping...
at what rate would it be worth it for me to refi ?
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