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Old 02-23-2009, 10:50 AM   #1
Sharkbait
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Default Home Refiancing - What's the skinny?

Everyone has been telling us that we need to refinance our mortgage "right quick." So, we're looking into it. I don't know the first thing about this, so I'm wondering if OT can school me on the basics.

We bought our home with an original 30 yr fixed mortgage @ 6.1% in 2003. Since then, the home has gone from 133K to 155K in value. (We own less than 115K on it.) Would refinancing work to drop the PMI, too, you think?

Do you have to pay full closing costs (and how much are those typically), or can you get that rolled into the loan cost? Is it best to start at the bank you have your current mortgage through, or another bank such as the one your personal accounts are with?

Thanks!
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Old 02-23-2009, 10:52 AM   #2
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I would shop around. We just refinanced and got about 1.5 points lower. We were able to roll the refi. costs into out new mortgage.
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Old 02-23-2009, 10:52 AM   #3
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First question: Have you checked the value lately through an appraisal? That will probably determine what follows after that.
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Old 02-23-2009, 10:53 AM   #4
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You're taking financial advice from people who say "right quick"?
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Old 02-23-2009, 10:54 AM   #5
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Quote:
Originally Posted by cucamelsmd15 View Post
First question: Have you checked the value lately through an appraisal? That will probably determine what follows after that.
Not yet - we just started talking about this. The only value idea I have is based on comps on our street and zillow (and zillow is waaaaay high. ) So, I'm going off of sold comps.

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You're taking financial advice from people who say "right quick"?
I like to say right quick. Makes me feel like I have street cred.
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Old 02-23-2009, 10:55 AM   #6
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Depends. How long do you envision living in your current house?

Mike Wevrick would counsel buying a place with plenty of farming area.
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Old 02-23-2009, 10:57 AM   #7
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Depends. How long do you envision living in your current house?
Really depends on how things shake out, but maybe 1-2 years max.
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Old 02-23-2009, 10:57 AM   #8
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I always imagined you in at least a 300k plus home.
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Old 02-23-2009, 10:57 AM   #9
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Originally Posted by Sharkbait View Post
Really depends on how things shake out, but maybe 1-2 years max.
I wouldn't bother doing the refi for that amount of time.
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Old 02-23-2009, 10:57 AM   #10
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I always imagined you in at least a 300k plus home.
Nope! 3 bedroom/2 bath, 1200sq foot home. No need for a McMansion with only 2 people and no sense in being house poor!
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Old 02-23-2009, 10:58 AM   #11
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Quote:
Originally Posted by Sharkbait View Post
Really depends on how things shake out, but maybe 1-2 years max.
Not worth it, in that case - I doubt you'll recover the closing costs, etc, in that timeframe.
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Old 02-23-2009, 10:59 AM   #12
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Not worth it, in that case - I doubt you'll recover the closing costs, etc, in that timeframe.
According to these calculators on Wachovia, it would drop about $300 a month.
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Old 02-23-2009, 11:00 AM   #13
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You're still paying PMI? You're being ripped off.
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Old 02-23-2009, 11:00 AM   #14
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Quote:
Originally Posted by boxered View Post
I wouldn't bother doing the refi for that amount of time.
I think he's trying to say you may not be in the home long enough to benefit from the reduced interest rate, as you'll have to pay fees to refi. The cost of the refi may cancel out any benefits.
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Old 02-23-2009, 11:00 AM   #15
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Quote:
Originally Posted by Sharkbait View Post
Not yet - we just started talking about this. The only value idea I have is based on comps on our street and zillow (and zillow is waaaaay high. ) So, I'm going off of sold comps.
Ok. If you owe less than 80% of the value, you can likely re-fi to todays rates. Some people will allow you to roll in your closing costs (generally 1% origination + other fees), but it depends on the lender. We had to pay ours when we bought our house. Also, if youre under 80%, you can lose the PMI, but you could call your lender and do that today if you wanted.

I seem to recall you guys were thinking about moving? If so (and within the next 12 months), I would probably sit tight. If you re-fi, youll have to stay in the house long enough for the savings to make up for the extra closing costs if that makes any sense. Else, youre just tossing money away.

Edit: Yep, what everyone else said before I could finish my post.
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Old 02-23-2009, 11:01 AM   #16
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Quote:
Originally Posted by Sharkbait View Post
According to these calculators on Wachovia, it would drop about $300 a month.
What are the closing costs, fees, etc? Sure you may save something but will it be worth it? Are you really in that sort of pinch?
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Old 02-23-2009, 11:02 AM   #17
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Assuming you originally put down 10% down, refinancing would save you about $109 a month not including PMI. You would also no longer have to pay PMI if your house is appraised @ $155K.
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Old 02-23-2009, 11:02 AM   #18
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Why do you want to refi?

If the goal is simply a lower payment per month -- then a refi might be a good idea - so long as you realize that the amortization of the loan starts over (i.e. you'll be paying more in interest on a per-payment basis for the new loan (which will have a new 30 yr term) then you would on your current loan (which is already 20% through the amortization cycle)).

There are "no cost" refi options too -- where their is no out of pocket cost but the lender will typically add .25 percent onto the otherwise lowest 30 yr rate. Lately -- that would result in about a 5.25 % rate.


If the value numbers you quoted are correct -- you should not be paying PMI anyway since you now have a 74% LTV (less than 80%).
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Old 02-23-2009, 11:04 AM   #19
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Quote:
Originally Posted by Kiwi View Post
I think he's trying to say you may not be in the home long enough to benefit from the reduced interest rate, as you'll have to pay fees to refi. The cost of the refi may cancel out any benefits.
12345

Quote:
Also, if youre under 80%, you can lose the PMI, but you could call your lender and do that today if you wanted.
678910 Do this ASAP regardless of anything else. As part of the process, you should get an idea of the home's current value.
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Old 02-23-2009, 11:06 AM   #20
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Hmmm, sounds like this might not be for us, given that we will move in the next couple years. We were just trying to lower the payment, but it looks like we won't be in the house long enough to see the value.

We still pay PMI, yes because we didn't put 20% down, and I called Chase to get it dropped, but they ran some calculator and said we weren't below the threshold yet. Are they screwing me around?

I might call them again.
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Old 02-23-2009, 11:06 AM   #21
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If the house is truly worth $155K, you can finance up to $124K and get rid of PMI. Yes, you can roll closing costs into your mortgage.

Assuming you put down 5% on your house that you purchased for $133K, you P&I payment is $725.38, If you refinance $124K at 5%, your P&I payment would be $665.66.

If you pay cash for closing costs at when you refinance, let's assume they cost $3500. You would finance only what you currently owe. So if you fiancee the $115K, your P&I payment would be $617.34. This saves you $108.04 per month (guessing at the numbers), but if you paid $3500 cash to refinance it would take 33 months to recoup from the monthly savings.

Also, if you are paying PMI - you can add that to your monthly savings which will reduce the number of months you need to recoup the monies...

So, if you are only going to be in the house 1-2 years it's not worth it...
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Old 02-23-2009, 11:07 AM   #22
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Quote:
Originally Posted by jblaze5579 View Post
I always imagined you in at least a 300k plus home.
Quote:
Originally Posted by Sharkbait View Post
Nope! 3 bedroom/2 bath, 1200sq foot home. No need for a McMansion with only 2 people and no sense in being house poor!
In NNJ, this is a 300K home.
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Old 02-23-2009, 11:07 AM   #23
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Quote:
Originally Posted by Sharkbait View Post
Everyone has been telling us that we need to refinance our mortgage "right quick."
I got to this part, and chuckled, and realized I really miss Southern people.
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Old 02-23-2009, 11:08 AM   #24
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I just want to know how your home went up in value !

As long as your loan-to-value ratio is acceptable (below 80% is great) you should have no problem getting a 30 year fixed at 5%. As for rolling in the refi costs, they should not be that high where this would make a big difference. Unless you plan on moving in a year or two, you should benefit from a refi, even if you roll all the associated costs into the new mortgage.
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Old 02-23-2009, 11:09 AM   #25
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Quote:
Originally Posted by Sharkbait View Post
Everyone has been telling us that we need to refinance our mortgage "right quick." So, we're looking into it. I don't know the first thing about this, so I'm wondering if OT can school me on the basics.

We bought our home with an original 30 yr fixed mortgage @ 6.1% in 2003. Since then, the home has gone from 133K to 155K in value. (We own less than 115K on it.) Would refinancing work to drop the PMI, too, you think?

Do you have to pay full closing costs (and how much are those typically), or can you get that rolled into the loan cost? Is it best to start at the bank you have your current mortgage through, or another bank such as the one your personal accounts are with?

Thanks!
Since we just refinanced our house. Here are my notes as a consumer, if I'm wrong on any of these points - someone will chime in:

* generally, if you owe less than 80% fo the new appraisal, you're good (provided your credit scores are excellent). My understanding is that score of 740+ brings in the best rates, rates below that are tiered according to your score
* the above criteria will also allow you to avoid PMI
* going from a 6.1 to a 5 or lower rate will of course save your monthly payments and the total interest paid in the long run - you can calculate how long you plan to live in the same house to recover the closing cost
* closing costs were around 3k for us, may be lower for you since your home value is less (I'm not sure whether some of the costs were a percentage of the home value)
* closing costs can be rolled into the refinance
* your personal bank may/may not offer the best rates - it really doesn't make a difference. When we were shopping, the banks that had the best rates were Wachovia and SunTrust - I had a thread regarding this a couple of months ago
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