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Started By
Message
Refi rules of thumb?
Posted on 8/22/23 at 1:37 pm
Posted on 8/22/23 at 1:37 pm
I have always read 1% minimum is what is needed to warrant doing one. I am getting a quote now for a 1% drop but it requires buying two points. A $190k loan to $195k loan after the refi and buying the points. The new quote is almost $100 exactly cheaper per month while still maintaining the same number of payment left.
Am I missing something as to why I wouldn't do this immediately?
And to answer the question later, I got stuck with a higher rate on a home because the mortgage company I was using dropped the ball the day before closing and their 30 @ 6.99% fell through and I had to get a local bank to quickly loan me the money at 8.25% (or lose the house). This rate is 7.25% buying the points. Sucks, I know, but just seeing it as at least being better than the current scenario.
Am I missing something as to why I wouldn't do this immediately?
And to answer the question later, I got stuck with a higher rate on a home because the mortgage company I was using dropped the ball the day before closing and their 30 @ 6.99% fell through and I had to get a local bank to quickly loan me the money at 8.25% (or lose the house). This rate is 7.25% buying the points. Sucks, I know, but just seeing it as at least being better than the current scenario.
6
Posted on 8/22/23 at 2:12 pm to rpg37
How much are the points and closing costs? Is it the 5k rolled into the loan?
Posted on 8/22/23 at 2:22 pm to rpg37
quote:
A $190k loan to $195k loan after the refi and buying the points. The new quote is almost $100 exactly cheaper per month while still maintaining the same number of payment left.
You are paying $5,000 in order to save $100/month.
I'm not sure this is the no-brainer that you think it is.
What would be the savings if you paid 0 points?
Posted on 8/22/23 at 2:40 pm to meansonny
how many payments are left?
Posted on 8/22/23 at 3:14 pm to rpg37
The answer depends upon how long you plan to keep this house.
Posted on 8/22/23 at 3:14 pm to rpg37
as with any refinance, "how long do you plan on living in this house?"
have to stay longer then the break even point of closing/points vs monthly savings.
Not a lot of info on your end to go on, but looks like $5k closing/points rolled into your loan, and saving $100/mo. so breakeven pay back is 50 months....
Next question if planning on staying there longer then 50 months, is "do you expect interest rates to drop within the next 50 months"
have to stay longer then the break even point of closing/points vs monthly savings.
Not a lot of info on your end to go on, but looks like $5k closing/points rolled into your loan, and saving $100/mo. so breakeven pay back is 50 months....
Next question if planning on staying there longer then 50 months, is "do you expect interest rates to drop within the next 50 months"
Posted on 8/22/23 at 3:15 pm to meansonny
quote:
You are paying $5,000 in order to save $100/month.
I'm not sure this is the no-brainer that you think it is.
What would be the savings if you paid 0 points?
The $100/month difference is factoring the $5k in refi costs.
Posted on 8/22/23 at 3:16 pm to tigeraddict
quote:
as with any refinance, "how long do you plan on living in this house?"
have to stay longer then the break even point of closing/points vs monthly savings.
Not a lot of info on your end to go on, but looks like $5k closing/points rolled into your loan, and saving $100/mo. so breakeven pay back is 50 months....
Next question if planning on staying there longer then 50 months, is "do you expect interest rates to drop within the next 50 months"
Yes sir...I am not in the house I would want to live in longterm, but it is in a great rental location right next to a great public school and a mile from the Ocean Springs downtown area. This would be a longterm investment property at the least. I plan to live here at least a few years though myself but not much interest in selling.
Posted on 8/22/23 at 4:43 pm to rpg37
quote:
The $100/month difference is factoring the $5k in refi costs.
I understand that.
You are essentially financing a cost of $5000 at 7.25% in order to save $100/month.
As was said, your break even is just over 50 months.
But if rates improve at any time during the next 50 months, you just paid more than you need to.
And 50 months is a long time.
You could lose/change jobs, relocate, have more babies and need something bigger, have an accident and need something wheelchair specific, etc..
If my breakeven return is over 50 months, I'm leaning on waiting for lower rates to refinance. Every politician and his/her uncle want lower rates for economic stimulus. It is not a bad bet that they will improve in the next 4+ years vs today.
Posted on 8/22/23 at 4:59 pm to meansonny
quote:
Every politician and his/her uncle want lower rates for economic stimulus.
This. I wouldn't do this deal. If rates stay this high for that long, bad things will happen. And then you can refinance. You can always buy points later if your anonymous internet advisors are wrong.
Posted on 8/22/23 at 8:36 pm to meansonny
I see what you are saying now...yes. I think this board just did the job for me not to refi at this offer at the time. Thanks all!
Posted on 8/22/23 at 9:24 pm to rpg37
It will take 2yrs to make up the difference
Rates will drop and you will refi again so I wouldnt do it to save 100
Rates will drop and you will refi again so I wouldnt do it to save 100
Posted on 8/22/23 at 9:27 pm to rpg37
quote:
This. I wouldn't do this deal. If rates stay this high for that long, bad things will happen. And then you can refinance. You can always buy points later if your anonymous internet advisors are wrong.
This. The general consensus is that rates will peak soon (or have already peaked, generally speaking), and will trend downwards over the next couple years. I 100% would forego refinancing right now. I think you will get a better opportunity in the next few years.
Posted on 8/22/23 at 11:12 pm to rpg37
quote:
Yes sir...I am not in the house I would want to live in longterm, but it is in a great rental location right next to a great public school and a mile from the Ocean Springs downtown area. This would be a longterm investment property at the least. I plan to live here at least a few years though myself but not much interest in selling.
Well if you want to do it legal you will need to let your mortgagor know that you are no longer living in the house and that you are renting it to a 3rd party. They may bump you to a higher rate or may force you to refi into an investment property loan. You'll also have to update your insurance.
Basically that plan isn't going to work for your refi.
Posted on 8/23/23 at 7:51 am to meansonny
hes paying 5k to lower his note and total interest paid over the life of the loan....he'll probably save over 60k over the life of the loan
to OP id say do it. these number almost match what i did in 2021. refinanced a 190k loan from 4.5 down to 3.0 and rolled the closing into the new loan. 195k loan with 3.0 rate and over the life of the loan ill save close to 90k in interest
to OP id say do it. these number almost match what i did in 2021. refinanced a 190k loan from 4.5 down to 3.0 and rolled the closing into the new loan. 195k loan with 3.0 rate and over the life of the loan ill save close to 90k in interest
Posted on 8/23/23 at 8:20 am to Pezzo
quote:
he'll probably save over 60k over the life of the loan
Stop being ignorant, he’ll only save that IF he stays there for 30yrs.
quote:
these number almost match what i did in 2021. refinanced a 190k loan from 4.5 down to 3.0
This is an apples and oranges comparison…..at 3% there isn’t much chance of money becoming much cheaper, at 8.25% there is a large chance that it becomes much cheaper. Good grief….
Posted on 8/23/23 at 9:42 am to TJG210
quote:
Stop being ignorant, he’ll only save that IF he stays there for 30yrs.
OP said he didnt have plans on selling the house and it was a long term investment.
Posted on 8/23/23 at 10:06 am to Pezzo
quote:
OP said he didnt have plans on selling the house and it was a long term investment.
If he isn’t using it as a primary residence, it doesn’t matter.
Either way my second point stands, in the next 50 months rates will likely be lower anyway without having to pay points, etc.
Posted on 8/23/23 at 10:28 am to Pezzo
quote:
hes paying 5k to lower his note and total interest paid over the life of the loan....he'll probably save over 60k over the life of the loan
Assuming he has about 29 years left on the loan, his savings will be less than $40k. And that is assuming that he doesn't refinance again, and will keep this property as a rental like he currently plans.
You can then run both amortization schedules together and compare the monthly ending balances. In doing so, you will find out that the ending balance on the refinance will remain higher than the ending balance on the current loan until around 11 1/2 years.
Posted on 8/23/23 at 12:16 pm to rpg37
Payed cash for my home. Can’t help.
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