To refinance or not

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prettybogle
Posts: 286
Joined: Sun Mar 01, 2015 10:44 am

To refinance or not

Post by prettybogle » Thu Apr 11, 2019 10:10 pm

We bought our house back in December 2018 mortgage interest rate 4.75. It looks like we can now refinance to around 4% interest rate. Is 0.75% to 0.875% drop in interest rate worth the refinance ? Our estimated closing costs are close to $5000.

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bottlecap
Posts: 6252
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

Re: To refinance or not

Post by bottlecap » Thu Apr 11, 2019 10:14 pm

Not enough information given to tell.

glennherwig
Posts: 21
Joined: Wed Oct 24, 2018 7:52 pm

Re: To refinance or not

Post by glennherwig » Thu Apr 11, 2019 10:18 pm

I would wait but that is just me. Follow 10 yr treasury yields. And make your decision based off that.

GPUser
Posts: 1
Joined: Thu Apr 11, 2019 11:09 pm

Re: To refinance or not

Post by GPUser » Thu Apr 11, 2019 11:15 pm

I'd like to hear opinions on this as well. I purchased last fall at 4.75% and could refinance now to 4.0% (jumbo 30 year fixed). If I use my credit union the fees would be ~$7k which would put my break-even at about 18 months.

glennherwig - are you saying that the treasury yields indicate that rates may go down further in the near future?

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Ketawa
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Joined: Mon Aug 22, 2011 1:11 am
Location: DC

Re: To refinance or not

Post by Ketawa » Fri Apr 12, 2019 1:42 am

The baseline for comparison should be a no-cost refinance. Compare a no-cost refinance to your current mortgage. Then determine if paying points on the refinance is worth it.

Bacchus01
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Joined: Mon Dec 24, 2012 9:35 pm

Re: To refinance or not

Post by Bacchus01 » Fri Apr 12, 2019 5:17 am

What’s the payback period? That’s what you need to look at. If the payback is under a year, we will refi. If it’s under two years, we may refi depending on fees.

Fees paid/monthly interest decrease = payback months. Forget the principle, it doesn’t matter in the analysis.

Example, the annual savings in year one on a $300K loan balance is about $2,250 for a .75% drop in rate. Can you get that done for less than $2,250 in out of pocket fees? Don’t roll them into the financing.

If your loan balance is $650K+, then I’d pay $5K to refinance to drop the rebate by .75%. If the balance is less, I’d probably not do it.

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