- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Mortgage re-finance question
Posted on 1/7/17 at 10:49 pm
Posted on 1/7/17 at 10:49 pm
I have a 30 yr fixed at 4.125. Starting to realize that I can afford to pay more on my monthly payment. Is it worth changing to a 15 yr fixed, roughly at 3.78? Or just keep the same mortgage and make payments towards principal at the "15 yr rate"?
For background - physician, 3 years out of training, bought a house 1 year ago w 10% down w a physician loan (ie not paying PMI).
TIA
For background - physician, 3 years out of training, bought a house 1 year ago w 10% down w a physician loan (ie not paying PMI).
TIA
7
Posted on 1/7/17 at 11:03 pm to quadfest
That's not much of a gap in rates.
You'd have closing costs and be locked into a 15 year term.
I would just make extra payments. Or invest the extra elsewhere.
You'd have closing costs and be locked into a 15 year term.
I would just make extra payments. Or invest the extra elsewhere.
Posted on 1/7/17 at 11:08 pm to quadfest
Get a financial calculator app, run an amortization schedule on your principal balance with the 15 year term with your existing rate and the refinance rate.
Estimate closing costs to be a minimum of $5,000 and divide that amount by the difference in the 2 payments. That's how long it will take to recoup your closing costs. If that length of time is over 8 years, I wouldn't refinance. If 5 years or less, I would refinance. Anything between those 2 time frames would be your personal decision.
Things to consider, how long will you be in the current house, how long before you would want a major renovation etc.
Estimate closing costs to be a minimum of $5,000 and divide that amount by the difference in the 2 payments. That's how long it will take to recoup your closing costs. If that length of time is over 8 years, I wouldn't refinance. If 5 years or less, I would refinance. Anything between those 2 time frames would be your personal decision.
Things to consider, how long will you be in the current house, how long before you would want a major renovation etc.
Posted on 1/7/17 at 11:54 pm to Skeet Mc
quote:
Get a financial calculator app, run an amortization schedule on your principal balance with the 15 year term with your existing rate and the refinance rate.
Better yet, learn how to construct an amortization schedule in Excel. It really isn't hard.
Posted on 1/8/17 at 1:37 am to foshizzle
quote:
Better yet, learn how to construct an amortization schedule in Excel. It really isn't hard.
Or use one of the 4878923748292 ones available online
Posted on 1/8/17 at 5:01 am to SG_Geaux
I'm pretty sure you could do better than that rate on a 15 year loan unless rates have went up a lot in the last week. Try calling someone at standard mortgage, they have good rates and fees. I refinanced with them about a year ago.
Posted on 1/8/17 at 7:05 am to LSU1018
I agree unless you are in a odd situation you should be able to save around 0.5% between a 15 and 30. It's going to cost you about $2500-3000 to refinance maybe more with a large mortgage, so only do it if you are for sure going to be in the house for long enough to save that difference. Honestly considering your income and when you bought the house I probably wouldn't do it as even if you think now you'll be there in 3 years the chances are probably slim.
Posted on 1/8/17 at 7:18 am to quadfest
pay the extra.
Posted on 1/8/17 at 8:18 am to quadfest
Keep the current loan, pay on it like 15. Depending on loan amount/refi costs, it may be cheaper vs refi. And the flexibility of putting that money somewhere else is always nice if the opportunity presents itself.
This post was edited on 1/8/17 at 8:19 am
Posted on 1/8/17 at 8:43 am to LSU1018
When I was looking for rates I honestly didn't look at all that many places (not a great move, but had a lot of things going on in life and didn't have the time).
Is it harder/more costly if I switch banks to re-fiinance?
Is it harder/more costly if I switch banks to re-fiinance?
Posted on 1/8/17 at 9:00 am to quadfest
Physician here as well, so you already know my financial advice is worthless.
My wife and I refinanced to 20 years about 6 months ago. We dropped from 4.5 to 3.25. Our payment went up just very slightly. We also used an online lender (Sebonic/Cardinal); and after closing cost credits, the whole process cost about $500 out of pocket (plus 30-40 hours of my time). I doubt we could have used an online lender to get the original mortgage, because it was too complicated for us for extenuating circumstances (no guilt now for changing either, because our original bank was purchased by a different bank,which is terrible).
I know my wife (and probably me too) did not have the the discipline to do extra payments. And I know there are many financial gurus who know they'd be better off keeping the loan and investing the difference. I respect them for that.
Still, my wife (also an MD) and I have about $1,000,000 in loans (student and mortgage), so the thought of getting that paid down quicker was appealing (though we struck the jackpot on our student loans at a rate of 1.85% so we will not touch that).
Finally, I doubt you get any financial benefit from sticking with your current bank. And if the rate difference is as modest as you say, it might not be worth the time or money (from your increased payments). If this is not your forever house, I would not refinance right now either.
Tl;Dr
Consider looking at 20 years as well, and consider an online lender.
My wife and I refinanced to 20 years about 6 months ago. We dropped from 4.5 to 3.25. Our payment went up just very slightly. We also used an online lender (Sebonic/Cardinal); and after closing cost credits, the whole process cost about $500 out of pocket (plus 30-40 hours of my time). I doubt we could have used an online lender to get the original mortgage, because it was too complicated for us for extenuating circumstances (no guilt now for changing either, because our original bank was purchased by a different bank,which is terrible).
I know my wife (and probably me too) did not have the the discipline to do extra payments. And I know there are many financial gurus who know they'd be better off keeping the loan and investing the difference. I respect them for that.
Still, my wife (also an MD) and I have about $1,000,000 in loans (student and mortgage), so the thought of getting that paid down quicker was appealing (though we struck the jackpot on our student loans at a rate of 1.85% so we will not touch that).
Finally, I doubt you get any financial benefit from sticking with your current bank. And if the rate difference is as modest as you say, it might not be worth the time or money (from your increased payments). If this is not your forever house, I would not refinance right now either.
Tl;Dr
Consider looking at 20 years as well, and consider an online lender.
Posted on 1/8/17 at 9:02 am to quadfest
Check out Zillow for all the online lenders...
They need income level, zip code, loan amount, and credit score. You tell them 15, 20, 30 year or whatever and then you'll get rates and credits for like 10 online lenders.
They need income level, zip code, loan amount, and credit score. You tell them 15, 20, 30 year or whatever and then you'll get rates and credits for like 10 online lenders.
Posted on 1/8/17 at 9:29 am to quadfest
I think the general rule is that you need to reduce your rate by at least 1% at the current levels. I would just double up on my payment in case something unforeseen happens, then you can easily go back to your normal payment.
I have a 30 yr and it is set up on biweekly payments which will give me an extra payment per year. You could switch to that and also double up on payments if you want it paid off sooner.
With your current rate, make sure you have emergency fund, retirement , etc set up before trying to knock out something that is a fixed cost (you will have rent no matter where you live).
I have a 30 yr and it is set up on biweekly payments which will give me an extra payment per year. You could switch to that and also double up on payments if you want it paid off sooner.
With your current rate, make sure you have emergency fund, retirement , etc set up before trying to knock out something that is a fixed cost (you will have rent no matter where you live).
Posted on 1/8/17 at 10:50 am to LSUSUPERSTAR
It is not more difficult to switch banks. Generally the bigger banks are going to charge higher rates and fees. I would get three quotes and negotiate them.
For the OP, I would not refi unless you are getting 3.25 for 15 year with less than 1500 lender fees including origination.
For the OP, I would not refi unless you are getting 3.25 for 15 year with less than 1500 lender fees including origination.
Posted on 1/8/17 at 12:30 pm to quadfest
You have 4 and an 8th (4.125%). You got quoted about 3 and 7/8ths. That's a Spread of .25% interest or 25 basis points and it's simply not worth it IMO.
Stay with the 4 and an 8th. Then take your current payment (PITI or Principal, Interest, Taxes and Ins. The entire monthly amount, including escrows) and divide by 12. Take that amount and tack that onto each payment. Indicate it is to be applied to the principal balance only.
You'll pay your 30 year term off in about 17-20 years. So you'll still experience the savings of interest from early payoff. But you'll still keep the flexibility if-God forbid-your income situation is impacted and you need to dial back the principal payments for whatever reason. You'll also be saving yourself the thousands of dollars in closing costs the refi will run you.
Stay with the 4 and an 8th. Then take your current payment (PITI or Principal, Interest, Taxes and Ins. The entire monthly amount, including escrows) and divide by 12. Take that amount and tack that onto each payment. Indicate it is to be applied to the principal balance only.
You'll pay your 30 year term off in about 17-20 years. So you'll still experience the savings of interest from early payoff. But you'll still keep the flexibility if-God forbid-your income situation is impacted and you need to dial back the principal payments for whatever reason. You'll also be saving yourself the thousands of dollars in closing costs the refi will run you.
This post was edited on 1/8/17 at 12:33 pm
Posted on 1/8/17 at 12:43 pm to GFunk
Good points made by all. Another question. I am leaning towards sticking with the rate I have but putting the additional amount towards principal that I would have to owe if did re-finance to 15year. Is there any argument to be made to take that extra money (roughly $1500/month) and invest it in my vanguard account? I ask because having to waste that much money on interest on the mortgage drives me nuts, but if I'm getting 8% return and my interest rate is 4.125, seems like it would make sense to invest it instead of towards the mortgage - unless I'm missing something.
Posted on 1/8/17 at 12:47 pm to quadfest
quote:
. Is there any argument to be made to take that extra money (roughly $1500/month) and invest it in my vanguard account? I ask because having to waste that much money on interest on the mortgage drives me nuts,
Yes, I would pay extra on the mortgage , but you are not wasting that on interest, it is going to reduce principal
This post was edited on 1/8/17 at 12:48 pm
Posted on 1/8/17 at 1:05 pm to Tigerpaw123
".. but if I'm getting 8% return and my interest rate is 4.125, seems like it would make sense to invest it instead of towards the mortgage - unless I'm missing something."
That's exactly right.
Many people do not have the discipline to invest and wind up spending it.
Also your 4.125 may be more like 3% if you take into account mortgage interest deductions on your taxes.
That's exactly right.
Many people do not have the discipline to invest and wind up spending it.
Also your 4.125 may be more like 3% if you take into account mortgage interest deductions on your taxes.
Posted on 1/8/17 at 4:20 pm to quadfest
Rules of 2s. Answer is no, you don't meet all the criteria.
Posted on 1/8/17 at 9:35 pm to ItzMe1972
Yeah, my wife and I don't know how long we'll be in this house, but probably at least 5 years.
Running some basic numbers, I don't think it's worth the work or $$ to re-finance.
Leaning towards making a conscious effort towards investing the $1500 I would have put towards the adjusted mortgage for now, and if the market returns drop, can then start putting towards the principal.
As an aside, is it safe to have same thought process regarding car loan w low interest rate? I can afford to pay off the car now, but have been investing instead. I find it difficult to decide whether to invest vs paying off debt.
Running some basic numbers, I don't think it's worth the work or $$ to re-finance.
Leaning towards making a conscious effort towards investing the $1500 I would have put towards the adjusted mortgage for now, and if the market returns drop, can then start putting towards the principal.
As an aside, is it safe to have same thought process regarding car loan w low interest rate? I can afford to pay off the car now, but have been investing instead. I find it difficult to decide whether to invest vs paying off debt.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News