Help: how to refinance a home?

[manleywoman]

Hi all. We have a condo we bought 8 years ago. We put 20% down, and the interest rate was 5.875%. Our current monthly mortgage is $1327.

Now that rates are so much lower, we are considering refinancing. But we are also thinking of moving either late 2011 or sometime in 2012 (looking at school districts). I'm wondering if it's worth it to pay the upfront costs to go through the process if we are moving so soon. Plus I don't even know who to call to get it done.

Thoughts?

[Skittl1321]

We called a few banks (and used their websites) and asked for their current rate and what closing costs would be. If you aren't scared of cold calling, just call and ask for their mortgage or refinancing department. In general they have a rate they'll tell you, but then they need to look at your specifics to make sure you qualify. We didn't let them check credit and stuff like that until we narrowed down who we wanted to work with. Even though we love our current bank (USAA) their offer was ridiculous, so we went with a local credit union.

My husband worked out an excel spreadsheet using some crazy math that figured out how long it would take for it to break even on how much we paid closing costs vs how much we save with the payment.

It turned out, we'd have to be there for about another year to make it worthwhile. (We changed from an adjustable to a 15-year. The ARM was decent though- it had very strict limits on what it could change, no teaser rates, 20% down- I think it actually would have adjusted down, but not as low as the 15-year.)

One thing we considered, because we want to move too- is that if we had gone for the 30-year and we had to move, but couldn't sell- the payment would have been very low, and much easier to bear 2 mortgages. In the end we went for the 15 because the interest savings over the lifetime of the loan, or even 3 to 5 years is HUGE. If we absolutely can't sell, we probably don't HAVE to move yet. We JUST refinanced like a month ago, and already the rates have dropped a huge amount. It's unbelievable how low these things are going... (and annoyingly ours actually went up in the middle of the process. We got a quoted rate, but the bank couldn't close it on time, so it went up like 2 tenths. grrrr)

If you're willing to share financial info- I can ask DH if he would do that spreadsheet for you (to compare a few rates, 15 yr vs 30 yr)- but it would help to call banks first and ask what they are offering. (You can PM me here, or message me on facebook if you remember my real name)

Some also make you pay the points- and I don't really understand that, but basically it's more money out to get a lower rate. In most cases, I've heard that's not worth it.

[Integrity]

I sent you a PM.

[manleywoman]

So I've called both USAA and GMAC (who holds my mortgage currently). I have one more call into my financial planner and accountant. GMAC so far has the best rates for me.

We want to move in one year, so I want a rate that's going to break even in a year. GMAC says if we go down to 4.25%, closing costs are $2900, and it will break even off the top of our mortgage in December 2011. And in the meantime we save $250/month.

Still waiting to hear from my financial planner and accountant to see if they can run the numbers too, but so far so good!

And I agree, USAA'a offer was ridiculous.

[Aceon6]

I'd keep calling. Several of our local banks are offering mortgages with closing costs under $1000. You'll pay about an eighth more, but your break even will be much faster.

[mpal2]

One thing people need to remember is that your home equity line of credit can close with the mortgage. If you have anything on that it will add to the amount you need to refinance.

If you're willing to share financial info- I can ask DH if he would do that spreadsheet for you (to compare a few rates, 15 yr vs 30 yr)- but it would help to call banks first and ask what they are offering.

Has your husband tried any of the online calculators?

http://www.mortgagecalculator.org/ca...-refinance.php


There are a ton of others. Just type mortgage refinancing calculators in google.

[manleywoman]

One thing people need to remember is that your home equity line of credit can close with the mortgage. If you have anything on that it will add to the amount you need to

Both Usaa and GMAc said I had a choice on that, that I didnt have to roll it in and could keep it separate. Which I'm doing since the rate on the line of credit is 2.75.

[mpal2]

Both Usaa and GMAc said I had a choice on that, that I didnt have to roll it in and could keep it separate. Which I'm doing since the rate on the line of credit is 2.75.

It all depends on the type of loan so that's good news for you. I thought mine was one of those but it wasn't. I had to close the old HELOC and am in the process of opening a new one. It's a PITA and it's good if you can avoid it.

[barbk]

Check your credit union (or one you're eligible for) -- they can have some very good rates, and they don't usually have a bunch of fees. In your case, trading off a slightly higher interest rate for a no-fee or very low fee loan would be beneficial.

[Skittl1321]

Has your husband tried any of the online calculators?

http://www.mortgagecalculator.org/ca...-refinance.php

Yeah- his spreadsheeting is a lot more extensive than anything we found online- he did a month to month breakdown of how much we'd pay, how much we'd still owe, the interest payments etc.

We've already refinanced though, and then the rates dropped even lower, of course.

[manleywoman]

Check your credit union (or one you're eligible for) -- they can have some very good rates, and they don't usually have a bunch of fees. In your case, trading off a slightly higher interest rate for a no-fee or very low fee loan would be beneficial.

I can do this too with GMAC: they said I could go as low as 3.75%, but the closing costs would be $6800, which meant I'd have to stay in my place for three more years before breaking even. So we found a rate that would break even in one year.

I could go with a slightly higher rate, pay less in closing costs, and break even sooner . . . but then I wouldn't save as much every month, and I'm fairly certain I will still be here in a year. Still, I guess it' worth asking how much it would be is we went with a slightly higher rate.

[iloveemoticons]

Another idea is to go through a reputable mortgage broker. They can help you find the best rate, and sometimes wholesale lending rates are lower than retail. With interest rates being so low right now, your APR is likely going to be lower than what you're paying now even if you get a no upfront cost loan, so I think it'd be worth it.