Finance or Pay Cash for Closing Costs on Refi ???

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Shaoya
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Finance or Pay Cash for Closing Costs on Refi ???

Post by Shaoya » Fri Oct 08, 2010 11:50 pm

Today I locked-in a rate on a refi of our mortgage. I'm trying to decide whether to pay the closing costs in cash or finance those, too.

The numbers looks like this:

Current mortgage principal: $316K 30-year fixed at 4.75%.

New locked-in rate will be 3.875% for 30-year fixed with 0.65% origination fee (~$2000) plus $3132 for other misc. closing costs = $5130 closing costs.

Him - 37
Her - 35
Plan to be in home "for the long haul" ~40 years?
Annual income ~$100K, 15% tax bracket

We have the cash for the closing costs in a MM fund, but I'm not sure whether to finance them, pay outright with cash, or half-half.

Any advice? Any other information needed? Thanks - Shaoya

DSInvestor
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Post by DSInvestor » Sat Oct 09, 2010 12:12 am

I'd pay cash. If you add it to the mortgage, it just makes it harder to pay off. Consider that your mortgage payments in the first year will be around 20K where 15K will be interest and just under 5K will be principal.

316K mortgage has $1648/month payment
Total Principal and Interest Payments: $593,424
Total Interest paid: $277,424

321,130 mortgage has $1675/month payment ($27/month more)
Total Principal and Interest Payments: $603,075 ($9,651 more)
Total Interest paid: $281,927 ($4,503 more)

I wouldn't want to pay $4,503 in interest to finance the closing costs if I had the cash.

mikep
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Post by mikep » Sat Oct 09, 2010 8:27 am

Pay cash if you have a full EF, since with a higher loan amount it slightly raises those other fees that are a % of the loan amount.

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Shaoya
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Post by Shaoya » Sat Oct 09, 2010 9:12 am

Thank you both!
mikep wrote:Pay cash if you have a full EF, since with a higher loan amount it slightly raises those other fees that are a % of the loan amount.
What's EF? Equity Financing?

mikep
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Post by mikep » Sat Oct 09, 2010 10:46 am

Shaoya wrote:Thank you both!
mikep wrote:Pay cash if you have a full EF, since with a higher loan amount it slightly raises those other fees that are a % of the loan amount.
What's EF? Equity Financing?
EF = Emergency Fund.

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tfb
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Post by tfb » Sat Oct 09, 2010 11:20 am

How about 4.0% and near zero closing cost? Check firstib.com for better rate and fees.
Harry Sit, taking a break from the forums.

raymjy
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Pay no fees

Post by raymjy » Sat Oct 09, 2010 8:15 pm

I would suggest you just pay a slightly higher rate but pay no fees. You have a free put if rates fall further and then don't have to worry about your prepaid costs

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