Mortgage Refinance Question

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abs9986
Posts: 111
Joined: Sun May 20, 2012 7:25 pm

Mortgage Refinance Question

Post by abs9986 »

Current mortgage is 30 year fixed at 4.35%. Total loan is ~ $170K of which we have ~ $160K remaining. The loan is 2 years old and we currently pay extra principal to effectively pay the loan off in 15 years.

My question is with 30 year rates now around 3.5 - 3.8%, should we be looking to refinance? I've never done this before, so I wasn't sure how the process worked.
1. Do I have to specifically search for a refinance loan, or would any 30 year loan I find work (i.e. Alliant's 30 year at 3.5%)?
https://www.alliantcreditunion.org/rates#mortgages

2. Given our loan is on the smaller side and we are aiming to pay it back in 15 years, does that make refinancing not worth it (note, I want to keep a 30 year rate so I can always fall back on the smaller monthly payment if we have to)?

3. Is it possible to get my current loan lowered to match market rates?

4. Where should I be looking for the lowest, but reputable rates? At what % difference does it make it worth it to refinance (I think I've heard .5% or more)?

5. Can someone explain the costs, points, etc.

6. If I refinance, does that restart the loan at 30 years?
mortfree
Posts: 2518
Joined: Mon Sep 12, 2016 7:06 pm

Re: Mortgage Refinance Question

Post by mortfree »

5. Costs include appraisal, loan origination, title, doc fees, notary, blah blah blah, etc. I was quoted 3600 recently for a refi with my credit union. Try not to pay points.

6. Yes the loan amortization on a refi starts back at 30 years.

Personally I wouldn’t go back to a 30 year but I would do a 15 or 20-year if it worked out for me.
delamer
Posts: 10913
Joined: Tue Feb 08, 2011 6:13 pm

Re: Mortgage Refinance Question

Post by delamer »

Given the current rates relative to your loan, it would be worth refinancing.

I’d start with your current lender and see what they will offer you. They probably won’t just change your rate, but might make a good deal to keep your business. There are no-cost refinancings that have a slightly higher interest but no closing costs.

When you check rates online, they’ll sometimes ask if it is a purchase or refi.

You might find that a 20 year loan would work for you, payment-wise, given the lower interest rates and slightly lower principal.
Topic Author
abs9986
Posts: 111
Joined: Sun May 20, 2012 7:25 pm

Re: Mortgage Refinance Question

Post by abs9986 »

Called my current lender and they are offering 3.99% (down from 4.375%) with an estimated total closing costs (includes taxes of $3500). That would basically lower my P&I payment by $40 per month which would take ~7 years to recover.

I guess I should try shopping around as that seems really crappy. Any other thoughts?
delamer
Posts: 10913
Joined: Tue Feb 08, 2011 6:13 pm

Re: Mortgage Refinance Question

Post by delamer »

abs9986 wrote: Wed Jul 03, 2019 10:30 am Called my current lender and they are offering 3.99% (down from 4.375%) with an estimated total closing costs (includes taxes of $3500). That would basically lower my P&I payment by $40 per month which would take ~7 years to recover.

I guess I should try shopping around as that seems really crappy. Any other thoughts?
That does sound pretty bad.

If you use the Bogleheads search function and look for “online mortgages,” you’ll find a few threads that will give you suggestions.
marklar13
Posts: 123
Joined: Wed Jul 08, 2015 11:47 am

Re: Mortgage Refinance Question

Post by marklar13 »

Tl;dr -- yes, find a lower rate and refinance. I found bankrate.com useful.

I was in a similar situation. I just went with the broker that my real estate agent recommend when I purchased, because we were moving to a new state and I just wanted everything to go smoothly (probably should have shopped around at the time, but just getting into the house was my main concern).

Less than a year later I did a no cost refinance. I just went on bankrate.com, found a good rate and went for it. I was pretty skeptical at the time not going with a lender I had heard of... but the process was super easy. Lowered my rate by 0.5% (4.25 to 3.75), with no out of pocket fees. I could have lowered more by paying upfront points -- I think the breakeven was like 11 years or something, and I decided to just do the no cost option.

No drawback other than the time I spent on the phone / signing papers. I had to scan some documents and fill out forms, and then once everything was approved they sent someone to my house to do the signing... although I could have chosen to meet somewhere. My loan was sold to Fannie within a couple weeks, and was even switched to the same servicing website... so I ended up in the exact same position with a lower rate and 1 extra year on the loan (since it reset back to 30 years).

The company I used was erates. I had never heard of them before I did the rate search on bankrate. I did some minimal investigation to make sure they seemed legit and then requested a quote, which basically matched what the bankrate website said. They called to follow up and I just followed their instructions to see it through.
froman118
Posts: 175
Joined: Fri Feb 04, 2011 1:04 pm

Re: Mortgage Refinance Question

Post by froman118 »

abs9986 wrote: Wed Jul 03, 2019 10:30 am I guess I should try shopping around as that seems really crappy. Any other thoughts?
marklar13 mentioned eRates who is now Lending.com. I did a no cost refi with them several years ago. I bought a house last year at 4.375% with Sebonic and just finished up a refi at 3.875% with First Mortgage Direct. All had very low fees which makes it easier to do a refi with little out of pocket. Rates seem to have dipped this week so definitely shop around. Your lower loan amount will make it harder for lender credits to cover closing costs and you might be up around 4% trying to minimize out of pocket cost.

Check out what's offered through Zillow, that's how I found all 3 of these lenders:

https://www.zillow.com/mortgage-rates/quotes
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greg24
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Re: Mortgage Refinance Question

Post by greg24 »

You should consider a 20 year.
Findourway1
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Joined: Tue Apr 02, 2019 8:18 am

Re: Mortgage Refinance Question

Post by Findourway1 »

We refinanced via Costco. Costco website referred us to 2-3 brokers who offered rates close to my credit union for much lower fees.

Also mortgage rates and credits apparently change every day - don't be in a hurry to lock down on whatever rate they offer. They always either offer a better rate or bigger credit.
softwaregeek
Posts: 612
Joined: Wed May 08, 2019 8:59 pm

Re: Mortgage Refinance Question

Post by softwaregeek »

For you, I think a 10/1 ARM would be an excellent thing to look at. By year 10, at your current rate of payoff, you would have so little left that it wouldn't matter what the interest rate is.
Student2
Posts: 84
Joined: Fri Jul 13, 2012 8:26 pm

Re: Mortgage Refinance Question

Post by Student2 »

I like the calculator at Mortgage Professor https://www.mtgprofessor.com/Calculator ... lator.html (pick the calculator that best describes your goals).

If you go all the way through the calculator, the website will offer you a list of 'upfront mortgage companies'. TL,dr: shop for a no-cost mortgage (not 'no cash'). This fixes two of the threes variables that can affect the cost of buying a mortgage (interest rate, points, and closing costs) and allows you to compare based on just interest rates. Once you've identified the mortgage provider with the best interest rate, buy the mortgage you want from them. This isn't a foolproof method, but unless you are working with a lender who specializes in a specific mortgage type, it's the only way I've found that lets you compare lenders. (Otherwise, it's a bit like mattress shopping.)

Oh, and make sure you get quotes on the *same day* from the lenders you're interested in. Rates change daily and it doesn't make sense to compare changes across days when you're trying to compare lenders.

Good luck!
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