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Property values and refinancing. - Page 2

post #31 of 51
2/4/09 at 12:41pm

Re: Property values and refinancing.

Quote:
Originally Posted by Bryan X
I think the bottom line is you just need to see how much interest you would be paying over the life of the loan currently and in each scenario. I wouldn't worry much about the number of payments. It's all about how much total interest you will pay.

Actually, I'm not sure I'd agree w/ that since we are talking about a lot of years there -- the simple math might not be enough, if you really want to know what you're actually gaining for each scenario. You might want to factor in the (investment) opportunity costs involved.

For instance, right now, we're in a deep recession, and the stock market (along w/ the economy) is trying to recover. If you lock in too much of your $$$ into a refi, you might miss out on certain things like the probable early recovery surges in the stock market over the next few years -- of course, if you do not believe that'll happen, then that would be another thing. 10-15 years is a long time. You might very well see *two* stock market cycles in 15 years.

Also, an "investment" might not only be something that yields a $$$ return (whether direct or indirect).

In the end, whatever route you take, I suspect you want a balanced approached. Don't go too crazy w/ aggressively paying down the mortgage as long as you have a solid plan to get it all paid off before you retire (and the extra $$$ isn't going to waste). Just my humble opinon of course...

_Man_
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post #32 of 51
2/4/09 at 1:46pm

Re: Property values and refinancing.

Quote:
You might want to factor in the (investment) opportunity costs involved.

Yes, there are lots of things you can factor in depending on each individual's situation. We don't know all the details so generalizations are as much as we can sometimes suggest. I was just trying to keep it simple.
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post #33 of 51
2/11/09 at 2:53pm
Thread Starter 

Re: Property values and refinancing.

well, I locked in a 15 year fixed at 4 7/8 with 1/2 point, so I guess I did OK, that's one full point below my 5 7/8th 20 year fixed that I've been paying since Dec '05 and it all works out to be about $50 more per month...

Jay
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post #34 of 51
10/10/09 at 8:17am
Rates are still low and I'm giving more serious thoughts on re-financing again.
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post #35 of 51
10/10/09 at 8:55am
I'm evaluating a 4.375% 15 yr re-fi. I've only watched erratically and never saw sub-5% 30 yr loans. Doing the 15-yr will increase my payments but decrease total interest paid. I'm running the numbers this weekend to see if it makes sense.
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post #36 of 51
10/10/09 at 9:49am
Also, if you like running the numbers in a spreadsheet (versus the various online calculators), I found this spreadsheet that can handle additional payments against principal. It lets you compare total interest paid and payoff time for a loan with and without extra monthly payments.

http://www.vertex42.com/ExcelTemplates/extra-payments.html
It has an Excel file for download. (And I'm using it in iWork 09, if you're an Apple geek.)
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post #37 of 51
10/10/09 at 7:02pm
I'm totally hoping to get a 4.5% (or less) 15-year re-fi with 1 point or less.  That keeps my payments the same, and shaves off 2.25 years of payments with my current loan.

Once I pay off my car in 2 years, and put all that monthly car payment money into my mortgage, that would pay off my mortgage in 9+years, and save almost $25,000 in interest (if I didn't do anything, I still would save $15,000 in interest).

I used the bankrate.com mortgage calculator that also shows the amortization schedule, and allows for extra payments and seeing how that affects the payback schedule.

I'm going to first call my own mortgage company and see what refi scenarios are possible and if they are acceptable to me.  Otherwise, I'll have to look towards other lenders.
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post #38 of 51
10/10/09 at 8:30pm
I'm noodling this ever more seriously.

If I refinance to a 15 yr, I'll knock another 3 years off my mortgage and save $25k (accounting for tax deductions and refi costs). But my monthly payment will increase 25%.

Or I can refi with an extra upfront payment of about 9% of my remaining mortgage, save $29k, and keep my monthly bill the same.

Basically, I need to decide if I should commit more money to my mortgage for the forseeable future to save a reasonable, but not huge, amount in interest overall. I wish I knew how to do Future Value accounting. And maybe a crystal ball with some predictions on the effects of inflations... :)
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post #39 of 51
10/14/09 at 6:00am
I did the refinance. Got 4.375% at 15 yrs with 0.25 pt. (grumble: rates went up that 0.25 pt in the three days I was analyzing the decision). I locked in the rate, being a pessimist :)

I'm told this takes about 3-4 weeks to complete the process.

I put together a spreadsheet to compare different options of paying extra monthly principal, refinancing, and extra down-payment. It also factors in tax deductions, and provides a crude analysis of the effective investment value of these options. If you're interested, I can make it available.
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post #40 of 51
10/14/09 at 8:35am
Dave,

If you don't mind me asking, what was the highest loan-to-value ratio (e.g., 70%, 80%, 90%, etc.) allowed by the party with whom you did your refinance?
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post #41 of 51
10/14/09 at 8:42am
Dave, were there any additional costs (besides the 0.25 point) to doing the re-fi?  I guess I'm thinking of the possible appraisal fees and all the paperwork fees that might accrue in a re-fi (I can't remember if I get hit with those fees since the last time I re-fi'd in 2002).
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post #42 of 51
10/14/09 at 10:44am
I didn't ask about the loan-to-balance ratio; though PMI is required if it's more than 80%. It will certainly depend on your refinancer. I do know

Yes, there are thousands of dollars in total fees to refi and they depend on your particular case and the refinancer. You can ask for a verbal estimate for initial planning. You can get a detailed "good faith offer" to precise planning and also as a negotation tool with other banks. I got two quotes, from my credit union and my current mortgage holder. They were significantly different.

The upfront costs I saw include:
  • $500 application fee (non-refundable, I assume)
  • $3000 - $5000 in other fees (taxes, appraisal, attorney, credit score, etc.)
  • Points
  • First Month's interest (pro-rated against closing date)
  • 6-mo taxes for escrow (current escrow will be cashed out to me a couple weeks after closing)
  • Additional "down payment" money to lower total loan

Much of these costs can be rolled into the mortgage if that suits you.
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post #43 of 51
10/14/09 at 4:57pm
Thanks for the rundown in costs.  Now to re-compute the numbers if I have to roll in some of the re-fi costs into the loan...

*grumble* a co-worker had a FHA loan and she got a lot of fees waived for her recent re-fi.
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post #44 of 51
11/21/09 at 8:53am
Closed on refinance yesterday. It took longer to drive to the bank's office than to sign the paperwork (about 20 min) :)

Rather than lower my monthly payments, I reduced the mortgage term with a view towards long term savings on interest paid. As an investment, it seems a reasonable, if conservative, use of my money. But given the past 20 years of stock market behavior and the forseeable future, I'm OK with that.
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post #45 of 51
11/21/09 at 9:48am
I'm weighing the 2 alternatives for a re-fi from either my current mortgage lender, and my credit union lender.

My current mortgage lender is down to 4.5% for a 15 year mortgage refi rate, and then we just have to see how much of the red tape costs can be reduced due to my company being on the list for perks (our company 401K plan is through this lender), and would roll all those costs into the mortgage.

The credit union is offering 4.25% for a 15 year mortgage refi rate, and roughly $2700 in red tape fees, which I'd roll into the new mortgage.

I'm hoping if I stay with my existing lender, I can get some fees waived since they already have the mortgage in-house, but we'll just have to wait and see, even if it's 0.25% more on the rate. 

Like I said before, either scenario keeps my payments nearly the same, while chopping off 2.25 years of payments on my existing mortgage.
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post #46 of 51
11/21/09 at 12:32pm
Depends on the current lender. My original mortgage holder was Countrywide / Bank of America and they were clearly interested in high fees. While I could have asked them to meet the costs of my Credit Union, I decided that in the time they took to sort that out, I could just have my CU do the refinance and be done with it.

With respect: what benefit is there in staying with your current lender that's worth 0.25% increased rate and (I infer) additional costs?
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post #47 of 51
11/21/09 at 5:14pm
That's the thing, I don't know about additional costs yet.  I was informed that I should be able to have appraisal fees waived just from working where I work (perks), so I need to see if there are any other benefits to keep the loan with my current mortgage holder.  Perhaps also less hassle to rollover the escrow details for my taxes and insurance if I keep it with the same lender.  Again, not sure until I get the final estimate.  If the 0.25 point difference results in $10/month more (i.e. roughtly $1,200 in extra costs over the years, as (I in intend to pay off the loan in 10 years or less), then I'll need to see nearly that positive difference upfront with my current lender.
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post #48 of 51
11/21/09 at 6:50pm
How long have you been waiting for that estimate, too? It should have been done in one business day. I got my estimates over the phone, live, with a followup email giving the official reference.

If you plan to pay off in 10 years, have you considered a 10 yr mortgage for an even lower rate?

Good wisdom in your decision :) It know it wrapped me up for several days sorting out the numbers and deciding what was best.
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post #49 of 51
11/21/09 at 6:54pm
Been playing phone-tag with the mortgage dude, plus have been dealing with a new roof last week, and a super-busy work week.  I'll have to see if the mortgage dude works during the early part of Thanksgiving week, so I have to check back on Monday.

My 10 year plan consists of paying off the car loan in 2 more years, followed by applying the car payment to the mortgage in those remaining 8 years.  So I can't quite go for a 10 year mortgage right off the bat.

Oh, I forgot, I just read that refi's with my lender can lead to no application or appraisal fees and no closing closts.
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post #50 of 51
11/21/09 at 7:34pm
That would be quite the savings. In NY, there about $1500 in state-required fees and then perhaps $1500+ in lender fees. Knocking out some of those could really drive that cost down.
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post #51 of 51
11/23/09 at 12:30pm
Well, looks like the interest rate went up to 4.5% at my credit union, so no advantage there anymore, now I get that rate at both lenders.

Plus, I should be able to save $300 on the appraisal cost, and get a reduction in escrow reserves for insurance/taxes if I keep the mortgage with the current lender at the time of closing.

But I don't qualify for the no closing fee situation (only if I wanted a larger loan amount, or am in financial straits, or somewhat upside down in the loan due to falling home values).  So, I think I'll just end up with my current mortgage lender after everything is said and done. 

There is this "intangible tax" line item that I need to ask about because it seems pretty tangible to me if I end up having to pay for it!
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