To refinance or not to refinance?

[crispini]

Got an offer from my mortgage company in the mail. I could go from my 5.875% to 4.375%, go from a 30 year to a 15 year and get the house paid off that much sooner. I've been in the house 5 years already, so I guess I have 25 years to go on the mortgage. I'd pay about $40 more a month. Good deal, yes? But they do want $4500 in fees, closing costs and whatnot. I've already been paying more on my principal each month to try and get it paid off early. Is it worth it? That seems like a lot of money. Sometimes I wish I had someone I could ask about these things. But I don't, so I'm asking DU! Hahahahaha.

[Schema Thing]

1. Sure seems worth it, crispini

If you plan on staying in the house for more than a year or two.

It wouldn't surprise me if the fees are somewhat negotiable as well. After all, they approached you, so they want your business; and if they want it, that means other companies would want it too.

[crispini]

3. Thanks, yes, I do plan on staying here.

I found an online calculator that said that the return point is three years, so that sounds good. thanks for the advice!

[cemaphonic]

2. Sure sounds like it

Although, as with a lot of mail offers, the difference might wind up being more than $40 a month once you get through the fine print. But it couldn't hurt to talk to them.

Also, for a refinance, you probably won't need to come up with the closing costs up front - they'll be rolled into the new loan.

[crispini]

4. Thanks, I will take a good look at the paperwork when I get it.

I may call a friend of mine who is a real estate agent and knows all about this kind of thing to ask his advice as well. :) Thanks for the advice!

[Dr. Strange]

5. Only $40 a month more? That doesn't sound right.

Even though the interest rate is lower, you're going from a 30-yr to a 15-yr. So, ignoring things like PMI and whatnot, for (say) a $150000 loan, the monthly payments would be
887.13 for a 30-yr at 5.875%
1137.93 for a 15-yr at 4.375%

If the refi were for 30 years at 4.375%, then the payment would be 748.93, which is smaller. But I don't know how they're coming up with just a $40 difference.

[crispini]

9. Well, I'm 5 years into it

if that makes a difference. So really I would be moving to a 20 year loan, over the life of the whole thing. I have 274 payments left on this mortgage and there would be 180 payments on the other one.

[SCantiGOP]

11. happened to me

We were a little over 3 years into a 6.5% mortgage, and refinanced at 4.75% for 15 years. My bill went up $33/month and effectively cut about 12 years off the mortgage. Also, Wells Fargo lets you do the every two weeks payment, so that will cut another year and a half or so off the mortgage.
on edit: They did raise the rate 1/4 percent to give me the 15 year instead of 30; I never could understand the logic behind that.

[Lex]

6. Keep your current mortgage, and the $4500, and figure out

how much more principal to pay each month on your current mortgage to pay off the loan in 15 years.

There are online calculators that can help you figure that out. This one will work:
http://www.mortgageloan.com/calculator/mortgage-payoff-calculator

[crispini]

10. See, these damn calculators all make no sense to me.

To me that looks like I would have to pay an additional $250 a month to pay it off in a total of 20 years. The refinance would definitely be a better deal than that.

[Lil Missy]

7. I wouldn't. If you're already paying extra on the mortgage, you can still pay it off in 15 years.

[Swede]

8. Put more money down on the principal,don't remortgage.

Here's a link that explains it. It's not the interest rate,it's how long you are exposed to it.


http://www.greatinspector.com/faq-fin-mor.html

[cyberswede]

12. Make sure your appraisal will be adequate

This may not apply in your area, but with home values decreasing, you run the risk of not being able to meet the 80/20 value that most banks require. You may end up paying for an appraisal and title search, and they can turn down your refi anyway.

Good luck, whatever you decide!

[KittyWampus]

13. sounds like an idea worth pursuing