Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

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Topic Author
fefifofum
Posts: 17
Joined: Fri Nov 04, 2016 7:35 pm

Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

Post by fefifofum » Sat Aug 01, 2020 2:10 pm

Hello! I've been pretty happy with our mortgage situation for a while, but as rates keep creeping lower I've been eyeing them and wondering when it becomes worth the hassle to go through the process again. This week I decided to start putting a little more time into the question and checked rates at a bunch of online mortgage places. But I'm still waffling over whether it's likely worth investing more time into.

I see there are many other refi threads, and I've read many of them, but wow does it get overwhelming trying to process all that information and try to figure out how other people's situations compare to our own. I'd really appreciate some outside opinions about our specific situation.

The question in a nutshell is: for a sub 200k loan at 3.125% which you intend to pay off in 10 years, how much of a rate decrease is needed before it feels worth it to you? And, would you pay points to lower the rate, or shoot for a the best rate you can get with 0 points?

Property:
  • Single family detached, primary residence
  • I've been using 500k as approximate value (rounding down a health chunk from Zillow)
  • We plan on being here at least another 10 years
Current Loan:
  • 15 year fixed at 3.125%
  • Remaining balance: 175k
  • Payment: 1740 (no escrow)
  • About 10 years remaining on the loan
Goals:
  • Reduce payment, but still pay off on roughly the same timeline
  • Save interest costs over the life of the loan
  • Minimize loan fees and so on
Income and credit:
  • We make enough money that there should be no question we can make the payment.
  • Credit score is 800+
I took a look at several different mortgage sources today:
  • Rocket Mortgage could get as low as 2.25% on a 10 year, but by paying significant points (total closing costs were $6900). Paying no points the rate was 2.875% (total closing costs $3000). They claimed they could get as low as 1.99% on a 15 year (again, paying significant points).
  • Better.com had worse rates for higher closing costs.
  • Loandepot.com had rates similar to Rocket, but with much higher closing costs.
  • A local credit union shows a rate of 2.5% for a 15 year loan -- but I'd probably have to call them to get details on 10 year loans or my specific situation.
  • My favorite online experience so far was aimloan.com, which gave estimates without having to submit a lot of information. For a 10 year loan with no escrow, they offered 2.625% with $995 closing costs, estimating payments of $1654 (so, $88 less a month, which I guess pays the closing costs in about a year?)
Of the above Aimloan seemed most appealing to me, but I'm not sure what other costs might emerge once I start actually getting into the process. I thought the local credit union might also be worth investigating.

Thanks for any insights you can offer!

MrJedi
Posts: 178
Joined: Wed May 06, 2020 11:42 am

Re: Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

Post by MrJedi » Sat Aug 01, 2020 2:16 pm

I think it's possible for you to get a new 15 year loan with lender credits covering all true closing costs (sections A+B+C+E), at better than your current rate.

In this case you will save money starting with the the first monthly installment.

You can take the lower monthly payment and get more cash flow. Or you can continue making the same monthly installment as your current loan and more of your payment will go to principal due to the lower rate and thus less interested accrued each month, this will decrease your payoff time.

When paying points/costs, it's all about how long you think you are keeping the loan, but when you get enough lender credits while still beating your current rate, it becomes a no brainer to at least pursue that.

FarmWife
Posts: 14
Joined: Wed Jul 15, 2020 9:07 am

Re: Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

Post by FarmWife » Sat Aug 01, 2020 2:42 pm

https://www.vertex42.com/ has some spreadsheets to help determine how much you'd save. I think I'd want it to be at least $10,000 saved, including the plan to pay if off early, to make it worth it. Refi's are an annoying headache to me.

JBTX
Posts: 6470
Joined: Wed Jul 26, 2017 12:46 pm

Re: Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

Post by JBTX » Sat Aug 01, 2020 3:20 pm

fefifofum wrote:
Sat Aug 01, 2020 2:10 pm
Hello! I've been pretty happy with our mortgage situation for a while, but as rates keep creeping lower I've been eyeing them and wondering when it becomes worth the hassle to go through the process again. This week I decided to start putting a little more time into the question and checked rates at a bunch of online mortgage places. But I'm still waffling over whether it's likely worth investing more time into.

I see there are many other refi threads, and I've read many of them, but wow does it get overwhelming trying to process all that information and try to figure out how other people's situations compare to our own. I'd really appreciate some outside opinions about our specific situation.

The question in a nutshell is: for a sub 200k loan at 3.125% which you intend to pay off in 10 years, how much of a rate decrease is needed before it feels worth it to you? And, would you pay points to lower the rate, or shoot for a the best rate you can get with 0 points?

Property:
  • Single family detached, primary residence
  • I've been using 500k as approximate value (rounding down a health chunk from Zillow)
  • We plan on being here at least another 10 years
Current Loan:
  • 15 year fixed at 3.125%
  • Remaining balance: 175k
  • Payment: 1740 (no escrow)
  • About 10 years remaining on the loan
Goals:
  • Reduce payment, but still pay off on roughly the same timeline
  • Save interest costs over the life of the loan
  • Minimize loan fees and so on
Income and credit:
  • We make enough money that there should be no question we can make the payment.
  • Credit score is 800+
I took a look at several different mortgage sources today:
  • Rocket Mortgage could get as low as 2.25% on a 10 year, but by paying significant points (total closing costs were $6900). Paying no points the rate was 2.875% (total closing costs $3000). They claimed they could get as low as 1.99% on a 15 year (again, paying significant points).
  • Better.com had worse rates for higher closing costs.
  • Loandepot.com had rates similar to Rocket, but with much higher closing costs.
  • A local credit union shows a rate of 2.5% for a 15 year loan -- but I'd probably have to call them to get details on 10 year loans or my specific situation.
  • My favorite online experience so far was aimloan.com, which gave estimates without having to submit a lot of information. For a 10 year loan with no escrow, they offered 2.625% with $995 closing costs, estimating payments of $1654 (so, $88 less a month, which I guess pays the closing costs in about a year?)
Of the above Aimloan seemed most appealing to me, but I'm not sure what other costs might emerge once I start actually getting into the process. I thought the local credit union might also be worth investigating.

Thanks for any insights you can offer!
I'm in a similar situation. About $150k remaining, 12 years left on 15 year 3.25% with quicken loans. I called QL and a true no cost new refi was 3.25. No benefit. A 2.75% would have been about $5k between fees and expenses. That would take about 7 years of interest savings to break even. To me, not worth it. Better was worse than QL. Better is worthless unless you can give them a competitive written quote that they can beat. I put inquiries out to Lenderfi and Northpointe and they just lazily reply with emails but never follow up.

So up to now I haven't been able to make it work. For me if the interest savings doesn't break even in 3 years, or 4 at most, it isn't worth it. But I'm going to keep an eye on things and see if something better comes up.

MathWizard
Posts: 4237
Joined: Tue Jul 26, 2011 1:35 pm

Re: Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

Post by MathWizard » Sat Aug 01, 2020 4:01 pm

At 3.125 % , I think you are as low as you can be on a 10 year payoff. Personally, I would not pay that amount of points.

If you need to lower payment for cash flow reasons, you can stretch out the loan, but you will pay more overall on the mortgage.

User avatar
8foot7
Posts: 2161
Joined: Mon Jan 05, 2015 7:29 pm

Re: Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

Post by 8foot7 » Sat Aug 01, 2020 4:50 pm

Look at an ARM — but pay the same payment you are paying now. You can probably get well under 3% and since you only have ten years left the risk of a rate shock in year 5 or 7 is noise

User avatar
anon_investor
Posts: 2660
Joined: Mon Jun 03, 2019 1:43 pm

Re: Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

Post by anon_investor » Sat Aug 01, 2020 4:58 pm

MrJedi wrote:
Sat Aug 01, 2020 2:16 pm
I think it's possible for you to get a new 15 year loan with lender credits covering all true closing costs (sections A+B+C+E), at better than your current rate.

In this case you will save money starting with the the first monthly installment.

You can take the lower monthly payment and get more cash flow. Or you can continue making the same monthly installment as your current loan and more of your payment will go to principal due to the lower rate and thus less interested accrued each month, this will decrease your payoff time.

When paying points/costs, it's all about how long you think you are keeping the loan, but when you get enough lender credits while still beating your current rate, it becomes a no brainer to at least pursue that.
+1. Check out the Mortgage Refinance Mega Thread for an idea of current rates. viewtopic.php?f=2&t=289559

Topic Author
fefifofum
Posts: 17
Joined: Fri Nov 04, 2016 7:35 pm

Re: Is a refinance likely to be worth it for us? Sub 200k loan, 10 years remaining, already at 3.125%

Post by fefifofum » Sat Aug 01, 2020 7:13 pm

Thanks, all, for the useful responses. They were all very helpful to me in thinking about this. FarmWife, I wanted to especially thank you for the reference to those Vertex42 spreadsheets... what a useful resource!

I was able to use the website for my existing mortgage to figure out the total amount I have yet to pay, then use a spreadsheet from Vertex42 to quickly get the idea of the equivalent totals for a few of the options I was looking at. The best option so far only seems to save us about $4k over 10 years... low enough that it may not be worth the hassle, or at least low enough that my level of urgency has decreased. I think I'll just keep an eye on things, maybe checking out aimloan.com periodically, and if I see the rates getting to a point where it might save more like $8k-10k think more seriously about it.

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