Refinance decision 3.75 vs. 3.25

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Topic Author
Scorpion
Posts: 388
Joined: Mon Sep 14, 2009 6:56 am

Refinance decision 3.75 vs. 3.25

Post by Scorpion »

I have refinanced twice in the last two years. In 2010, I went to a 3.75% 15 year fixed. I am now considering whether it is worth it to go to a 3.25% 15 year fixed. Mortgage balance around 300K. Closing costs all-in are pretty cheap, between $750 and $1,000. Two issues:

1. Will my credit rating be adversely affected by refi'ing 3 times in the last 3 years (counting the current time)?

2. Is it worth it? Online mortgage calculators like the one on www.erate.com say yes, but I have noticed that they show it as worth it under almost any scenario. Even refi'ing from 3.75% to 3.70% is worth it - break even in 3.6 years and save $6000 over 15 years. My actual scenario is 0.8 years to break even and save ~$15K over 15 years.

3. It is highly unlikely we will move during the 15 year period.

Thanks for any help you can provide.
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G-Money
Posts: 2867
Joined: Sun Dec 09, 2007 6:12 am

Post by G-Money »

1. I can't imagine it would adversely affect your credit that much. If a bank is willing to lend you $300K for 15 years at 3.25% with out-of-pocket costs of less than $1,000, I don't think you need to worry too much about your credit.

2. My rule of thumb for a reasonable breakeven period is between 12 and 18 months. At .8 years, I'd say go for it.

Double check the math. Try the mortgage calculators at the Mortgage Professor (my favorite), http://mtgprofessor.com/calculators/Calculator3a.html, and Bankrate, http://www.bankrate.com/calculators/mor ... lator.aspx

3. Don't mistake the unlikely for the impossible.

Good luck.
Topic Author
Scorpion
Posts: 388
Joined: Mon Sep 14, 2009 6:56 am

Post by Scorpion »

Thanks. I tried the bankrate.com one, and it says that I can recoup $800 closing costs on even a 3.70% loan (so in other words, a 5 basis points change in interest rates) in less than 9 months. So it's even more aggressive than erate.com. Not sure why there is a difference with erate on that calc. BTW, my impression is that closing costs are very cheap in Wisconsin compared to some other states.
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