Refinance...any reason NOT to?

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Topic Author
scophreak
Posts: 126
Joined: Tue Jan 12, 2016 1:17 pm

Refinance...any reason NOT to?

Post by scophreak »

Hello all,

Given the current rate situation, considering a refi of my current mortgage. Even though I have a great rate, wondering if there is any reason NOT to move forward to an even better rate.

Current mortgage
$266,000 currently owed
~61% LTV
22.5 years remaining on a 30-year original term
3.00% rate

Available no-cost options (LenderFi)
30-year 2.875% APR
25-year 2.875% APR
20-year 2.875% APR

Overall savings would be minimal, but a dollar is a dollar, right? Interesting that my current options show no additional benefit to shortening the term. Considering moving forward with the 30-year option and continuing to pay along my current amortization schedule to payoff in 22.5 years.

Any downside to this that I'm overlooking? Never explored a refi before so wanted to leverage the collective experience/wisdom of the board.

Thanks!
MrJedi
Posts: 343
Joined: Wed May 06, 2020 11:42 am

Re: Refinance...any reason NOT to?

Post by MrJedi »

The benefit is very small in that case, you may not want to due to the paperwork and credit pull, etc. If you have not refi'd before, it may be a good exercise to do it and get the experience of the process along with the very small benefit.

If you don't need the cash flow, with 22.5 years on your current loan, I would consider looking at a 15 year mortgage, you may get a no cost offer that ends up with a monthly payment very close to your current loan but paid off much quicker.

There is a significant break when you go to 15 years for most lenders. 20 and 25 year loans don't always have a break compared to 30, small if one does exist at all.
petulant
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Re: Refinance...any reason NOT to?

Post by petulant »

Going from 3% to 2.875% saves approximately $332 per year at your current mortgage balance, which is less than $30 per month. Presumably that's even less if you ever itemize. I would leave it until rates drop more, or look into one of the following: 1) reduce term to 15 years for an even lower rate, or 2) pay closing costs and possibly points to get the rate down a lot, if planning to stay in house for the long-run and the ROI looks good.
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anon_investor
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Re: Refinance...any reason NOT to?

Post by anon_investor »

OP, honestly I would wait for rates to drop a little further, .125% rate reduction, even if no cost is probably not worth the hassel. I have completed 2 refi's this year alone and 0.5%+ was the trigger point for me.
KATNYC
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Re: Refinance...any reason NOT to?

Post by KATNYC »

Is LenderFi taking new applications? The website says they are not.
We are going through this right now. Rates came in for 30 year fixed at 2.875% with no points and 2.375% with a rate buydown.
We have a 10/1 ARM with 7 years left at 3.375% so there is no rush.
We owe $169K and the last appraisal a few years ago came in at 600k.
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anon_investor
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Re: Refinance...any reason NOT to?

Post by anon_investor »

KATNYC wrote: Fri Aug 07, 2020 10:56 am Is LenderFi taking new applications? The website says they are not.
We are going through this right now. Rates came in for 30 year fixed at 2.875% with no points and 2.375% with a rate buydown.
We have a 10/1 ARM with 7 years left at 3.375% so there is no rush.
We owe $169K and the last appraisal a few years ago came in at 600k.
There is a backdoor way to apply to LenderFi:
https://app.lenderfi.com/

I closed with LenderFi last week on a 2.75% 30 yr fixed at no costs.
BlueCable
Posts: 340
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Re: Refinance...any reason NOT to?

Post by BlueCable »

I would do it, especially if you don't itemize. $300 a year is a lot!

Do you value a couple hours of your time more than that?

I'm doing another refinance (3rd in the 2 years we've owned this home!) at 2.125% for 15-year. We are currently at 2.625%. We are paying about 0.5% of the loan value to drop from 2.375% to 2.125%, which will break even in the 3rd year. The other refinances we've done have been no-cost, but I just don't expect the rates to drop more. But I know nothing.
VCC
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Re: Refinance...any reason NOT to?

Post by VCC »

Pay down your LTV to 60% to get the best rates on 20-30 yr loans.
VCC
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Re: Refinance...any reason NOT to?

Post by VCC »

On 20-30 yr loans above 60% LTV, Fannie Mae adds a .25% LLPA fee that the lender will pass on to you. On 266,000 loan balance, that is $665. You'll probably see a .125 rate drop if you pay the balance down to 60% by closing.
Topic Author
scophreak
Posts: 126
Joined: Tue Jan 12, 2016 1:17 pm

Re: Refinance...any reason NOT to?

Post by scophreak »

VCC wrote: Fri Aug 07, 2020 1:21 pm On 20-30 yr loans above 60% LTV, Fannie Mae adds a .25% LLPA fee that the lender will pass on to you. On 266,000 loan balance, that is $665. You'll probably see a .125 rate drop if you pay the balance down to 60% by closing.
:thumbsup
That is extremely helpful information. My ~61% LTV is actually based on a 2.5 year old appraisal. Also, had a typo in my loan balance...it's actually $261,606.50, which would require a $436k value for 60% LTV. Given my 2.5 year old appraisal is at $425k I'm likely at that threshold (though the loan estimate is based on the old $425k appraisal).
jsaver
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Re: Refinance...any reason NOT to?

Post by jsaver »

I'm at 3.25% on a 15 year that has a bit less than 12 years left. Balance is $245K. Appraisal at the time was around $520K.

Credit is excellent. I'm tempted to refi, but the experience last time was such a PITA than I haven't pulled the trigger yet.
jsaver
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Re: Refinance...any reason NOT to?

Post by jsaver »

anon_investor wrote: Fri Aug 07, 2020 12:12 pm I closed with LenderFi last week on a 2.75% 30 yr fixed at no costs.
What was your experience with LenderFi like? My refi three years ago with eRates Mortgage (Finance of America) I recall being a PITA. Uploading documents to several different web sites. Mistakes in the paperwork that to be redone. The notary they sent to do the final signing didn't have all the correct papers when he arrived and we had to reschedule. Those sorts of things. Ultimately it got done but it was painful.
KATNYC
Posts: 490
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Re: Refinance...any reason NOT to?

Post by KATNYC »

anon_investor wrote: Fri Aug 07, 2020 12:12 pm
KATNYC wrote: Fri Aug 07, 2020 10:56 am Is LenderFi taking new applications? The website says they are not.
We are going through this right now. Rates came in for 30 year fixed at 2.875% with no points and 2.375% with a rate buydown.
We have a 10/1 ARM with 7 years left at 3.375% so there is no rush.
We owe $169K and the last appraisal a few years ago came in at 600k.
There is a backdoor way to apply to LenderFi:
https://app.lenderfi.com/

I closed with LenderFi last week on a 2.75% 30 yr fixed at no costs.
Thanks. They don't work in NY unfortunately.
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batpot
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Re: Refinance...any reason NOT to?

Post by batpot »

The only reason NOT to refi is that your amortization starts over.
You'd have to do the math for yourself, but arguably if you paid on the new loan as you're paying on your current higher rate loan (extra principle payments), there's a point in the future where the lower rate will equate to a faster pay down.
3of10
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Re: Refinance...any reason NOT to?

Post by 3of10 »

VCC wrote: Fri Aug 07, 2020 1:21 pm On 20-30 yr loans above 60% LTV, Fannie Mae adds a .25% LLPA fee that the lender will pass on to you. On 266,000 loan balance, that is $665. You'll probably see a .125 rate drop if you pay the balance down to 60% by closing.
+1. Op, here is the Fannie Mae LLPA matrix table to see what VCC is referring to.

https://singlefamily.fanniemae.com/media/9391/display
Topic Author
scophreak
Posts: 126
Joined: Tue Jan 12, 2016 1:17 pm

Re: Refinance...any reason NOT to?

Post by scophreak »

3of10 wrote: Fri Aug 07, 2020 8:56 pm
VCC wrote: Fri Aug 07, 2020 1:21 pm On 20-30 yr loans above 60% LTV, Fannie Mae adds a .25% LLPA fee that the lender will pass on to you. On 266,000 loan balance, that is $665. You'll probably see a .125 rate drop if you pay the balance down to 60% by closing.
+1. Op, here is the Fannie Mae LLPA matrix table to see what VCC is referring to.

https://singlefamily.fanniemae.com/media/9391/display
Thanks...

Reviewing the loan estimate again, the numbers show a $262,285 loan with a $441,000 home value. That puts me at 59.5% LTV, or below the 60% threshold for the 0.25% Fannie Mae LLPA fee. It appears that my location (PA) is driving my available no-cost choices more than anything. It takes a lender credit of $3214 to get to a true no-cost 30-year loan. In a state with more reasonable closing costs I could almost certainly do significantly better on the rate.
MrJedi
Posts: 343
Joined: Wed May 06, 2020 11:42 am

Re: Refinance...any reason NOT to?

Post by MrJedi »

scophreak wrote: Sat Aug 08, 2020 11:02 am
3of10 wrote: Fri Aug 07, 2020 8:56 pm
VCC wrote: Fri Aug 07, 2020 1:21 pm On 20-30 yr loans above 60% LTV, Fannie Mae adds a .25% LLPA fee that the lender will pass on to you. On 266,000 loan balance, that is $665. You'll probably see a .125 rate drop if you pay the balance down to 60% by closing.
+1. Op, here is the Fannie Mae LLPA matrix table to see what VCC is referring to.

https://singlefamily.fanniemae.com/media/9391/display
Thanks...

Reviewing the loan estimate again, the numbers show a $262,285 loan with a $441,000 home value. That puts me at 59.5% LTV, or below the 60% threshold for the 0.25% Fannie Mae LLPA fee. It appears that my location (PA) is driving my available no-cost choices more than anything. It takes a lender credit of $3214 to get to a true no-cost 30-year loan. In a state with more reasonable closing costs I could almost certainly do significantly better on the rate.
I don't live in PA, but just from seeing the activity in the refi topics here, PA seemed to have relatively high title insurance and/or transfer/deed taxes. This means you need a lot more credits to offset the closing costs as you've seen, which ultimately drives your rate up if you are looking for no cost.
Last edited by MrJedi on Sat Aug 08, 2020 2:12 pm, edited 1 time in total.
3of10
Posts: 149
Joined: Tue Jun 30, 2020 7:37 am

Re: Refinance...any reason NOT to?

Post by 3of10 »

scophreak wrote: Sat Aug 08, 2020 11:02 am
3of10 wrote: Fri Aug 07, 2020 8:56 pm
VCC wrote: Fri Aug 07, 2020 1:21 pm On 20-30 yr loans above 60% LTV, Fannie Mae adds a .25% LLPA fee that the lender will pass on to you. On 266,000 loan balance, that is $665. You'll probably see a .125 rate drop if you pay the balance down to 60% by closing.
+1. Op, here is the Fannie Mae LLPA matrix table to see what VCC is referring to.

https://singlefamily.fanniemae.com/media/9391/display
Thanks...

Reviewing the loan estimate again, the numbers show a $262,285 loan with a $441,000 home value. That puts me at 59.5% LTV, or below the 60% threshold for the 0.25% Fannie Mae LLPA fee. It appears that my location (PA) is driving my available no-cost choices more than anything. It takes a lender credit of $3214 to get to a true no-cost 30-year loan. In a state with more reasonable closing costs I could almost certainly do significantly better on the rate.
Dropping the LTV below 60% should result in no fees from Fannie Mae. That is why it's important to know exactly what your current loan balance is, along with what you feel the value is for the house. It can be difficult in coming up with the value of one's home.

When I was recently helping someone with their refi, I had them contact their realtor to get a pricing for their home. As to whether to do the refi, it's one's personal choice on what interest rate to proceed with it. With the difference between your current rate, and refi rate being small, definitely go with the no-cost loan, but be familiar with the different sections of the LE (which you should have obtained). Sections (A+B+C+E) is where the true costs are.

Check out the "mega refinance" thread. There were a few posters from PA updating with their experience in doing the refi.

viewtopic.php?f=2&t=289559
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