APR on Mortgage from 3.55% to 3.48% Good Deal?

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jmndu99
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APR on Mortgage from 3.55% to 3.48% Good Deal?

Post by jmndu99 » Wed Jul 12, 2017 8:06 pm

Good Evening Fellow Bogleheads,

I have a mortgage with a good interest rate. I am a veteran and have a veterans loan.

I have been receiving offers from other mortgage companies and the latest perked my interest.

This is called an interest rate reduction loan. My interest rate is the same as this letter offers, only the APR is different.

I have phones the company who holds the mortgage and the rep told me that I would have to apply and be approved for a refinance.

I understand .07 basis points on an APR is not much, at the same time, FEES MATTER! I plan on staying for the long haul.

Has anyone here refinanced to lower the APR? Please excuse my ignorance.

Thank you all,
J

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welderwannabe
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Re: APR on Mortgage from 3.55% to 3.48% Good Deal?

Post by welderwannabe » Wed Jul 12, 2017 8:08 pm

I am not an expert in this area but I would guess the refinancing fees (appraisal, lender's title insurance etc) will far exceed whatever savings you would get from 7bp.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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jmndu99
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Re: APR on Mortgage from 3.55% to 3.48% Good Deal?

Post by jmndu99 » Wed Jul 12, 2017 8:17 pm

Thank you welderwannabe for giving me something to consider

jadedfalcons
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Re: APR on Mortgage from 3.55% to 3.48% Good Deal?

Post by jadedfalcons » Wed Jul 12, 2017 8:25 pm

Are there fees for refinancing, though? When I bought my house, my mortgage got bundled up and sold to Wells Fargo. Later, I went through their refi-at-home program (that they solicited me for) in which they refinanced me to a lower interest rate, and all I had to do was fill out some papers and get a form notarized. Dropped me from 5.75% to 4.375%, could have done better elsewhere, but I figured not having to spend money on a closing had some value too.

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jmndu99
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Re: APR on Mortgage from 3.55% to 3.48% Good Deal?

Post by jmndu99 » Wed Jul 12, 2017 8:48 pm

Hi jadedfalcons,

I have not inquired about fees yet. My interest rate will stay the same, its the APR that is different.

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Kosmo
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Re: APR on Mortgage from 3.55% to 3.48% Good Deal?

Post by Kosmo » Wed Jul 12, 2017 9:11 pm

jmndu99 wrote:Hi jadedfalcons,

I have not inquired about fees yet. My interest rate will stay the same, its the APR that is different.
Why would you pay for a refinance if the interest rate is the same? The APR considers all fees in total which you've already paid when you got the existing mortgage. You can't lower it by paying more fees. You'd be effectively getting a very expensive recast.

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jimb_fromATL
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Location: Atlanta area & Piedmont Triad NC and Interstate 85 in between.

Re: APR on Mortgage from 3.55% to 3.48% Good Deal?

Post by jimb_fromATL » Wed Jul 12, 2017 9:18 pm

No way that it could be worthwhile.

There's a .5% VA funding fee in addition to closing cost that typically run in the range of 1% to the maximum allowable of 2% of the new mortgage balance.

How much is your balance, and what your payment for P&I alone? Need to know the Principal and Interest for the loan itself, since the T&I (escrow for Taxes and Insurance) is not really part of the mortgage cost. (You'd have to set aside money for taxes and insurance even if did not have a mortgage at all.)

What are the actual rates of your current and the proposed loans?

To give you example, for every $100,000 owed:

If you owe $100,000 at 3.55% with 336 months ( 28. years) remaining the payment is $470.05 per month for P&I. The total paid will be $157,937 with $57,937 interest.

you refi and roll in 1.5% ( $1,500 ) for the funding fee and low 1% closing costs then $101,500 at 3.48% for 360 months has a payment of $454.65 per month for P&I. The total paid will be 360 x $454.65 = $163,673 with $62,173 interest. The total cost is $5,736 more than the current mortgage and adds 24 months of payments.

If the actual rate is not lower, then all you'd be doing is adding the closing costs and funding fee to the loan and paying compound interest on it for the new loan period.

jimb

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