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Old 07-23-2010, 12:20 PM
 
Location: West Texas
2,440 posts, read 3,570,090 times
Reputation: 2999
Default Refinancing without getting ripped off

I'm sorry if this is a repeat, but I tried to go back through as many posts as I could to see if this was already answered, and nothing jumped out at me.

I own my house (well... I'm making mortgage payments) in Texas and I believe my interest rate is 5.75% (when I bought it new in 1998). With the decline in interest rates, I was wondering if I should try to refinance for a lower interest rate, or if the savings would be negligible over having to pay that additional 12 years I'd add on (that I've already been paying on this loan).

I don't know if I'm asking the question right or not. But bottom line am I better at staying with the 5.75% for the next 18 years, or to refinance again for another 30 at whatever the going rate is now (which I still believe is below 5%)? My biggest fear is getting someone to give me an adjustable rate and telling me it's not (and not reading all 536 pages of excruciatingly small print telling me that it's really an adjustable rate).

Thanks!
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Old 07-23-2010, 12:32 PM
 
Location: Austin
4,263 posts, read 7,709,970 times
Reputation: 3261
Whenever you can refi 1% or more below what you currently have, it's a great time to refi. However, what you need to do is run the numbers as to what you would be saving a month by dropping your rate verse how long it will take for you to recoup the refinance expenses. If you're going to be there longer than the recoup time, definitely refi and do it before rates go back up!
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Old 07-23-2010, 12:48 PM
 
21,440 posts, read 34,547,137 times
Reputation: 10465
You need not fear signing-up for a fixed rate and getting an adjustable, that is just not going to happen.

You should, however, be leary of any lender that has more than about 5-10 pages TOTAL of documentation, as things are well regulated as to what they MUST disclose, but not in what they may "shove at you" in addition to the required stuff...

Further, as you have been in your home for well over ten years you might want to explore not just reducing your interest rate BUT ALSO the term of your mortgage. Given current conditions you could very well get a 15 year mortgage that has no higher monthly than currently pay. There is really no reason not to get at least a 20 year mortgage, if not a 15 or 10...

Depending on how long you intend to live in your house you might explore several options, all of which would also result in rather substantial total savings if properly compared to your existing...
(note: I assume that the OP has sufficient equity in their property to make refi easy, a situation that seems likely, but NOT assured...)
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Old 07-23-2010, 01:08 PM
 
Location: West Texas
2,440 posts, read 3,570,090 times
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Quote:
Originally Posted by chet everett View Post
(note: I assume that the OP has sufficient equity in their property to make refi easy, a situation that seems likely, but NOT assured...)
I'm going to let my ignorance show here and say I'm not quite sure I understand what you mean having sufficient equity. But if I'm guessing right, I bought the house for $83.5k back in '98 - I know I financed more than that with interest, etc. My current loan amount is down to about $78k. The houses in my area are now selling for about $140k ($135-$160... but the latter is the guy across the street and I don't think he'll get $160k). I have done some improvements (replaced the air conditioning/handling unit with a larger one, had porcelain tiles laid in the kitchen and dining room, and had laminate flooring replace the cheap carpet in the living room, entry way, and main halls. I also changed the original ceramic sink with a dual stainless steel one. Finally, I had a water softener and reverse osmosis system installed).

If that's not what you're referring to, I apologize. I'll try to address it if you reply again.
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Old 07-23-2010, 01:15 PM
 
21,440 posts, read 34,547,137 times
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That is exactly what you need -- anytime your equity is under 20% refinancing is more of a challenge. For folks unfortunate enough to owe more than the house is worth basically is stuck.
You pretty clearly are in good shape. In fact, given how much equity you have(140-78) AND the fact your mortgage amount is small you MIGHT want to explore doing a 'cash out' refi. This would allow you to get a better rate (as there is typically an upcharge for borrowing small amounts) and then turning right around and giving all the extra dough back to the lender, if you have no other debts.

Of course this assumes that you sufficient income to borrow more, and again I would encourage you to use on-line calculators to ensure that the numbers you are being told jive with what you want to accomplish, but honestly this ought to save you a lot of money in the long run...
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Old 07-23-2010, 01:20 PM
 
Location: Austin
4,263 posts, read 7,709,970 times
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In Texas, cash-out refi's are not as simple as in other states. You MUST retain 20% equity in the home, and they are very strict on other criteria as well when they're giving money back to you, and that criteria keeps changing. If you don't need the money and don't want to finance more than what you currently own, don't bother jumping through the Texas Cash-out refi program. It's probably not worth the headache.
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Old 07-23-2010, 01:23 PM
 
Location: Plano, Texas
1,672 posts, read 4,272,313 times
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Assuming your credit is okay, you could refinance to a 15 year term under 4%. Currently 30 year fixed rate mortgages are in the middle 4's.

It definitely looks like you should refinance unless you plan on selling the home within the next 12 to 24 months.

As Chet said, with all the new regulations and oversight, it will be impossible for you to think you are getting a fixed rate but it is actually a adjustable rate.
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Old 07-23-2010, 01:27 PM
 
Location: West Texas
2,440 posts, read 3,570,090 times
Reputation: 2999
Thank you all VERY much for the input... my wife and I have been talking about this now that markets may have finally bottomed out, and I want to get in on a deal before rates climb again. I'll discuss all you have shared with her as well and we'll move forward.


~Rath
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Old 07-23-2010, 02:53 PM
 
Location: N of citrus, S of decent corn
16,237 posts, read 18,697,756 times
Reputation: 24683
Do you have any good, independant community banks in your area? Our bank here has just instituted no closing costs for refinancing mortgages. This really makes it a no brainer. About 10 years ago, we lived in a different state, but our small bank there had the same thing.
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