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Started By
Message
Should I refinance?
Posted on 8/21/14 at 3:26 pm
Posted on 8/21/14 at 3:26 pm
Backstory: purchased a home using a rural development loan, was right under the income limit. Received large promotion at work that pushed me way over the limit. Because I put no money down, should I refinance to a 15 year loan to save a boat load on interest?
2
Posted on 8/21/14 at 3:34 pm to 1860pissed
Current Interest rate? Loan amt?
More information is needed.
More information is needed.
Posted on 8/21/14 at 3:45 pm to eng08
need more info like interest rate. Also, assuming you went RD and put nothing down, you will need to deal with PMI and a new loan that will be much higher then that in the RD loan
Posted on 8/21/14 at 3:45 pm to 1860pissed
quote:
should I refinance to a 15 year loan to save a boat load on interest?
As stated.... need more info. But based on this statement and historically low rates, likely a good move
Posted on 8/21/14 at 4:12 pm to Mr.Perfect
4.25% interest rate. $240k loan. I didn't think about PMI being different. With the RD loan the PMI is extremely low.. Should I wait until I have 20% equity before refinancing to avoid PMI?
Posted on 8/21/14 at 4:17 pm to 1860pissed
Why don't you just pay extra each month and keep the loan you have?
Posted on 8/21/14 at 4:22 pm to LNCHBOX
I looked at an amortization table and the difference in interest (looking at just principal and interest) between the RD loan and the 15 year loan at 240k is almost 120k. That makes me want to refinance. Paying more each month with the same 4.25% at 30 year doesnt knock off near the same amount of interest as getting a lower rate at 15.
ETA: Im just not sure how PMI plays into all of this. FWIW the house appraised for 246k
ETA: Im just not sure how PMI plays into all of this. FWIW the house appraised for 246k
This post was edited on 8/21/14 at 4:23 pm
Posted on 8/21/14 at 7:12 pm to 1860pissed
to get the PMI off of your payments you need to have paid off at least 20% of the current appraisal of your house. If it is appraising at 246K, you would need to either put 50K down or have that much equity in the home at this point. If you are at that point, you will see a big dip in your payment soley by getting rid of the PMI.
Posted on 8/21/14 at 7:25 pm to 1860pissed
quote:
I looked at an amortization table and the difference in interest (looking at just principal and interest) between the RD loan and the 15 year loan at 240k is almost 120k. That makes me want to refinance. Paying more each month with the same 4.25% at 30 year doesnt knock off near the same amount of interest as getting a lower rate at 15.
This depends on how much more you pay per month.
Posted on 8/21/14 at 7:33 pm to 1860pissed
If you are currently paying 4.25% then a refi is probably not a good move.
If you itemize your tax deductions, you can deduct your mortgage interest, so your real after-tax rate is probably around 3% more or less. And that's near the rate of inflation. You do *not* want to pay money up front to reduce your interest rate below the rate of inflation.
If you itemize your tax deductions, you can deduct your mortgage interest, so your real after-tax rate is probably around 3% more or less. And that's near the rate of inflation. You do *not* want to pay money up front to reduce your interest rate below the rate of inflation.
Posted on 8/21/14 at 7:47 pm to foshizzle
I dont have 50k equity into it so PMI would still be there. My PMI with the RD loan is less than $50 a month so even when it goes away, its not a huge decline.
Tiger4ever, how much would you suggest paying?
Thanks foshizzle. That does make sense. I guess its just tempting when you look at saving that much in interest over the life of the loan.
Tiger4ever, how much would you suggest paying?
Thanks foshizzle. That does make sense. I guess its just tempting when you look at saving that much in interest over the life of the loan.
Posted on 8/21/14 at 9:12 pm to 1860pissed
There's some mortgage calculators online that will show a side by side comparison of your current amortization table and one with extra payments. Looking at the comparison can help you determine what you want to do.
I would pay extra only what you are comfortable with though. Also realize that once you pay you cannot easily get it back out.
I would pay extra only what you are comfortable with though. Also realize that once you pay you cannot easily get it back out.
Posted on 8/22/14 at 12:10 am to 1860pissed
What he (^) said but if you allow yourself to back-slide on not paying the over-and-above amount down each month, human nature says you'll find something else to spend the money on monthly, and then the interest on the mortgage will fiscally eat you up.
Make a reasonable budget and stick to it.
Make a reasonable budget and stick to it.
Posted on 8/22/14 at 7:29 am to 1860pissed
PMI will kill you if you don't have 20% equity.
Posted on 8/22/14 at 8:18 am to LNCHBOX
quote:
PMI will kill you if you don't have 20% equity
This, PMI on a RD loan is really low in comparison to traditional and extremely low compared to FHA.
However, you pay that the life of the loan. Like others have said, if you want the benefit of 15 year vs 30 year, then just make extra payments until you reach that 20% threshold. Then, sit down and see what you options are then.
like others have said, your rate is fairly low, once inflation starts to creep up, your rate will look even better, getting to a point that its best not to pay off earlier because your maney can do more work for you elsewhere
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