Refi options--what would you do?

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Topic Author
DVA79
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Refi options--what would you do?

Post by DVA79 »

Looking for some advice from people much smarter on this than me:

Current financing: 3.62% on a 30 year loan, 306 months (25.5 years) left on current balance of 264,000. Current payment is $1,313 a month with total payments to be $401,909. Home located in Chicago Suburbs

Called my local broker who I originally got the loan through and this was his offer on current rates:

Proposed New Mortgage Amount $264,000.00
  • Proposed 30 Year Rate 3.000% --new payment would be $1,113; Total savings: $1,217
    Proposed 25 Year Rate 3.000% --new payment would be $1,251 ; Total savings $26,334
    Proposed 20 Year Rate 2.875% --new payment would be $1,447 ; Total savings $54,468
    Proposed 15 Year Rate 2.625% --new payment would be $1,775 ; Total savings $82,247
Closing costs about $2,100. Ouch, seems high.

Are these rates good? I haven't shopped around yet and wondering if I should.

I am a teacher with about 15 years left before retirement so job is steady. Three kids ages 6,4,1. Spouse is stay at home mom. Currently have saved about 370K spread between Roths, 403b, and emergency fund.
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ruralavalon
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Re: Refi options--what would you do?

Post by ruralavalon »

DVA79 wrote: Fri Nov 20, 2020 11:16 am Looking for some advice from people much smarter on this than me:

Current financing: 3.62% on a 30 year loan, 306 months (25.5 years) left on current balance of 264,000. Current payment is $1,313 a month with total payments to be $401,909. Home located in Chicago Suburbs

Called my local broker who I originally got the loan through and this was his offer on current rates:

Proposed New Mortgage Amount $264,000.00
  • Proposed 30 Year Rate 3.000% --new payment would be $1,113; Total savings: $1,217
    Proposed 25 Year Rate 3.000% --new payment would be $1,251 ; Total savings $26,334
    Proposed 20 Year Rate 2.875% --new payment would be $1,447 ; Total savings $54,468
    Proposed 15 Year Rate 2.625% --new payment would be $1,775 ; Total savings $82,247
Closing costs about $2,100. Ouch, seems high.

Are these rates good? I haven't shopped around yet and wondering if I should.

I am a teacher with about 15 years left before retirement so job is steady. Three kids ages 6,4,1. Spouse is stay at home mom. Currently have saved about 370K spread between Roths, 403b, and emergency fund.
Because "about 15 years left before retirement" I suggest a 15 year mortgage.

A good resource to see available rates is bankrate.com.
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oldcomputerguy
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Re: Refi options--what would you do?

Post by oldcomputerguy »

This topic is now in the Personal Finance forum.
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gr7070
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Re: Refi options--what would you do?

Post by gr7070 »

DVA79 wrote: Fri Nov 20, 2020 11:16 am I haven't shopped around yet and wondering if I should.
Obvious first decision is to shop around. Both the rate and the closing costs.

Check PenFed. They're usually competitive for both. At the very least PenFed will provide a good floor to compare other loans.

If you can reasonably afford it go for the 15 year! You don't need the risk-averse approach of the 30-year.
Barsoom
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Re: Refi options--what would you do?

Post by Barsoom »

See if your lender has a loan modification program instead of a full refinance.

-B
Olemiss540
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Re: Refi options--what would you do?

Post by Olemiss540 »

Shop around. Should be able to get 30 year rates closer to 2.5%
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Minty
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Re: Refi options--what would you do?

Post by Minty »

Take a look at the Refi Mega Thread.
Core Four w/ nominal bonds & TIPS. Refi Rampage: Purchase: 3.875% 30 -> R1 3% 20 -> R2 2.375% 15 -> R3 1.99% 15
Topic Author
DVA79
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Re: Refi options--what would you do?

Post by DVA79 »

Thanks...I did some shopping at Loan Depot and Better Mortgage. They were able to to a 15 year at 2.375% with closing cost ($2154) rolled into loan and and a credit to me of about $200 at close. I showed this to my local lender and he said he would match it (he was offering 15 year at 2.65%)

This would take my current payment from $1313/Month to $1754/Month but save me about 90K compared to staying in my current 30 year loan.

How do these closing cost sound? Any reason not to pull the trigger on this?
Golf maniac
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Re: Refi options--what would you do?

Post by Golf maniac »

Interest rates and closing costs are based on numerous factors and no one on here can tell you if the rate or closing costs are good or bad. You have to do the work and find out from shopping the loan at several banks, credit unions, broker, and online lenders. The key question on term is what can you afford and still save for retirement and possibly college expenses? I would recommend the 15 year if you can afford it.
Firemenot
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Re: Refi options--what would you do?

Post by Firemenot »

DVA79 wrote: Fri Nov 20, 2020 6:02 pm Thanks...I did some shopping at Loan Depot and Better Mortgage. They were able to to a 15 year at 2.375% with closing cost ($2154) rolled into loan and and a credit to me of about $200 at close. I showed this to my local lender and he said he would match it (he was offering 15 year at 2.65%)

This would take my current payment from $1313/Month to $1754/Month but save me about 90K compared to staying in my current 30 year loan.

How do these closing cost sound? Any reason not to pull the trigger on this?
I’d just go with Loan Depot then. I closed a mortgage with them last month and it was fine. They have a good online process. Why reward the company that didn’t give you a good rate out of the gate?

Also, in your situation, I’d do a 30-year mortgage. The interest rate savings aren’t compelling enough to lose the liquidity, especially with a single-earner family. If you feel compelled, you could always pay on a 15-year schedule, although I wouldn’t. I’d invest the money.
Topic Author
DVA79
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Re: Refi options--what would you do?

Post by DVA79 »

Thanks all.

**update 2
After sleeping on it and reading some comments, I am now leaning towards a 20 year refi. I can get it at 2.625% with payments going to $1423/month compared to $1313/month now. I can swing that, save a chunk of interest while shaving 5 years off the loan, and it won’t pinch me as much as the 15 year month payment. I could swing the 15 year but with 3 little kids who’s knows what comes up. I don’t want to be mortgage poor and want money for trips and experiences while my kids are young.

I appreciate everyone’s input. Just sent in an app to Loan Cabin to see if I get get a better rate than 2.625 on a 20 year. Hoping my current lender will then match that (don’t see why he wouldn’t since he matched the 15 year).
FamilyMan
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Re: Refi options--what would you do?

Post by FamilyMan »

Firemenot wrote: Sat Nov 21, 2020 6:33 am
DVA79 wrote: Fri Nov 20, 2020 6:02 pm Thanks...I did some shopping at Loan Depot and Better Mortgage. They were able to to a 15 year at 2.375% with closing cost ($2154) rolled into loan and and a credit to me of about $200 at close. I showed this to my local lender and he said he would match it (he was offering 15 year at 2.65%)

This would take my current payment from $1313/Month to $1754/Month but save me about 90K compared to staying in my current 30 year loan.

How do these closing cost sound? Any reason not to pull the trigger on this?
I’d just go with Loan Depot then. I closed a mortgage with them last month and it was fine. They have a good online process. Why reward the company that didn’t give you a good rate out of the gate?

Also, in your situation, I’d do a 30-year mortgage. The interest rate savings aren’t compelling enough to lose the liquidity, especially with a single-earner family. If you feel compelled, you could always pay on a 15-year schedule, although I wouldn’t. I’d invest the money.
I see your point about rates. However, in OP’s position, I would recommend a 15 or 20 year loan. If he does a 30 year loan, he has to be disciplined paying it down otherwise he’ll be bringing the loan with him into retirement. And it’s not easy voluntarily paying extra on the mortgage with having 3 young kids. That shorter loan length forces you to be done with it in a specific time frame. But just my opinion.
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ruralavalon
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Re: Refi options--what would you do?

Post by ruralavalon »

FamilyMan wrote: Sat Nov 21, 2020 12:22 pm
Firemenot wrote: Sat Nov 21, 2020 6:33 am
DVA79 wrote: Fri Nov 20, 2020 6:02 pm Thanks...I did some shopping at Loan Depot and Better Mortgage. They were able to to a 15 year at 2.375% with closing cost ($2154) rolled into loan and and a credit to me of about $200 at close. I showed this to my local lender and he said he would match it (he was offering 15 year at 2.65%)

This would take my current payment from $1313/Month to $1754/Month but save me about 90K compared to staying in my current 30 year loan.

How do these closing cost sound? Any reason not to pull the trigger on this?
I’d just go with Loan Depot then. I closed a mortgage with them last month and it was fine. They have a good online process. Why reward the company that didn’t give you a good rate out of the gate?

Also, in your situation, I’d do a 30-year mortgage. The interest rate savings aren’t compelling enough to lose the liquidity, especially with a single-earner family. If you feel compelled, you could always pay on a 15-year schedule, although I wouldn’t. I’d invest the money.
I see your point about rates. However, in OP’s position, I would recommend a 15 or 20 year loan. If he does a 30 year loan, he has to be disciplined paying it down otherwise he’ll be bringing the loan with him into retirement. And it’s not easy voluntarily paying extra on the mortgage with having 3 young kids. That shorter loan length forces you to be done with it in a specific time frame. But just my opinion.
I still think 15 years is best. In my opinion it's best to enter retirement debt free if at all possible.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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