With all the recent news about interest rates dropping has gotton me to pondering my mortgage. We got our house in 5/07, 85K FHA, fixed for 30 years at 6.5%. Taxes & insurance are included, monthly payment is 740.00 We aren't in financial difficulty but a lower payment would be welcomed to put the difference into savings. I called the mortgage company we initially used because the lady we had was just excellant to us & we are loyal to them. She said she would run some numbers and get with our loan officer (she is his assistant but she is better than him in my opinion, lol) and would get back to us. She called yesterday and stated they could get us 5.5% with the cost of the refi at 2500 which could be worked back into the loan. Which will save us about 70.00 a month. She then said my credit has improved significantly, oh nooooo..... I knew then she had pulled my credit, I could'nt be upset although I just called for a estimate to ponder over. Sigh.... oh well if we decide to do it they would have to anyhow. Anyway I guess I am concerned that we should'nt be doing this so soon? We have no plans to move, we will be here at least 10 years till the youngest gets out of school, if not forever. My first thought is that it would be to our advantage but I have never refinanced before so I'm not sure. If we do can we refi again later on down the road? Will this hurt me credit wise? Thanks in advance, Tegleg
Well Teg, you're right on the "cusp" for the rule of thumb regarding refinancing. The rough rule is "1 percentage point", so dropping from 6.5% to 5.5% is right there. Of course the number one concern is, are you sure you can get the mortgage at this rate? Other things to consider: Total cost of refi: Estimate total costs and fees (you say $2,500.00), Break even period: $2,500.00 total costs divided by $70/month savings = 35.7 months period to "break even". If you stay longer than 3 years, you start saving money... Total Cost Savings: go to www.bankrate.com for mortgage calculators. Plug in values for you proposed mortgage, and look for total "paid" (principal & interest ovr life of mortgage). Compare versus total payments remaining in current mortgage. Quickly loking at it, your savings would be about $22,000.00 over the life of the mortgage. Other suggestions: request the estimates for running your mortgage for 29 years, not 30 (to match your current remaining mortgage period). It should be about the same, but ask anyway. Also, double check your PMI requirements, your equity may have changed a bit, so see where you stand on the PMI requirement. Lastly (and I know you will not fully like this idea), ask for a better deal on costs and fees...things are tight in the mortgage industry, deals can be had right now. Lastly, ask if they will give you the option to take a lower interest rate prior to closing (if rates fall). I think the Fed is going to cut some more, possibly up to another 1/2 point before they stop. A 5% rate will save you about $100/month..
Thank you Biz, you are such a godsend for information! I hope you know how much I appreciate all my information benefactors on this board. I just send a email to the mortgage company, when she talked to hubby yesterday she told him we were prequalified for that rate of 5.5%. I take that to mean it would fly. I have asked for clarification of that and a GFE. We just did our primary mortgage 6 monthes ago. I also asked if there would be other costs and what all would have to be done to accomplish the refi. I hope it will be easier than the last time! The information per the option to get a lower rate prior to closing is awesome! I will ask that! And I will haggle for the best deal. She is pretty good about that but the fact remains they are a lender...... Just the savings over the life of the loan sounds like enough reason to go with it. In fact it seems we would be dumb not to. 2,500 added to the loan but a potential over all savings of close to 20K over the life of the loan is a no brainer. Plus extra money every month to devote to emergency savings. I will email her again about asking for the 29 year instead of 30. I hadn't thought of that at all. And I will ask per the PMI. Thank you so much! I am printing this message for further reference. Always grateful, Tegleg
Teg, Just for fun, you might ask what the rates are, and monthly payments would be, for a 15 year mortgage. There are usually HUGE savings over a 30 year, and not that much difference in the monthly payment.
