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Old 10-25-2013, 12:01 PM
 
Location: Scottsdale, AZ
1,988 posts, read 3,804,349 times
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Your post is confusing. You say that your rate was 4.5% when initiated and is now 3% (correct, LIBOR has gone down), but that your payments went from $1100 to $1400? They should have gone down with your rate.

Anyway, the key to determining if you should refi is, the costs to refi (closing costs) and the new amortization schedule. You are now 9+ years into your current loan and you are starting to see a larger portion of your payment into principle. If you refi, you will start over again at payment 1 and 99.9% of your payment will go to interest.

A lot depends on your situation. Is it your intention to pay this loan off? Do you itemize on your taxes? How much longer do you plan on staying in the home?

There is not enough information in your post to tell you which is the better decision.
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Old 10-25-2013, 12:02 PM
 
Location: Southern California
4,350 posts, read 4,961,067 times
Reputation: 2129
Is there any chance your loan is owned by Fannie or Freddie?
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Old 10-25-2013, 03:23 PM
 
Location: Southern California
4,350 posts, read 4,961,067 times
Reputation: 2129
Quote:
Originally Posted by AZJoeD View Post
Your post is confusing. You say that your rate was 4.5% when initiated and is now 3% (correct, LIBOR has gone down), but that your payments went from $1100 to $1400? They should have gone down with your rate.

Anyway, the key to determining if you should refi is, the costs to refi (closing costs) and the new amortization schedule. You are now 9+ years into your current loan and you are starting to see a larger portion of your payment into principle. If you refi, you will start over again at payment 1 and 99.9% of your payment will go to interest.

A lot depends on your situation. Is it your intention to pay this loan off? Do you itemize on your taxes? How much longer do you plan on staying in the home?

There is not enough information in your post to tell you which is the better decision.
It went from an I/O to a P & I payment, payment is recalculated over the remaining years for the loan.
At 3% and a 21 year schedule more than 1/2 of your payment is principal.

"If you refi, you will start over again at payment 1 and 99.9% of your payment will go to interest. "
This is a misconception, just like you need 20% down to buy a house. Even at 4.5% and a 30 year loan, 25% of your payment is principal. I guess you can round up 75% to 99.9% if you want. What few people realize, is when the interest rates are low, a larger portion of your payment goes towards principal versus if your interest is higher. Even a new 30 year loan at 3% , 40% of your payment would go towards principal. This is why I encourage people with ARMs right now to make that extra payment , because so much of it is going to principal reduction.
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Old 10-25-2013, 09:51 PM
 
Location: San Diego CA
1,030 posts, read 2,002,559 times
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Quote:
Originally Posted by thelopez2 View Post
It went from an I/O to a P & I payment, payment is recalculated over the remaining years for the loan.
At 3% and a 21 year schedule more than 1/2 of your payment is principal.

"If you refi, you will start over again at payment 1 and 99.9% of your payment will go to interest. "
This is a misconception, just like you need 20% down to buy a house. Even at 4.5% and a 30 year loan, 25% of your payment is principal. I guess you can round up 75% to 99.9% if you want. What few people realize, is when the interest rates are low, a larger portion of your payment goes towards principal versus if your interest is higher. Even a new 30 year loan at 3% , 40% of your payment would go towards principal. This is why I encourage people with ARMs right now to make that extra payment , because so much of it is going to principal reduction.
Exactly...
The rate was at 4.5% during the I/O loan term. After the interest only period was up, the interest rate went down but the monthly payment went up.

Thanks for confirming my thoughts of making extra payments to principal.
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Old 10-26-2013, 04:20 AM
 
Location: Southern California
4,350 posts, read 4,961,067 times
Reputation: 2129
Quote:
Originally Posted by Mugsy View Post
Exactly...
The rate was at 4.5% during the I/O loan term. After the interest only period was up, the interest rate went down but the monthly payment went up.

Thanks for confirming my thoughts of making extra payments to principal.
I think you should explore your options with B of A too, if they are willing to do a new adjustable with a lower rate, even if it is a little higher then your current, you are locked in for at least a few more years. I think going from 3% to 3.125% where you can lock it for at least another 5 years is a good idea, or even a 7 year arm.

If this is a loan mod and they put it on your credit report, it is something like a settled debt, non only is it a point ding , buy you might be eliminated from certain lender programs because they don't like modified loans.
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