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Hi,
I am planning to refinance my house. I only bought it last year at a VA 30 year loan @4.25%. Now we have some offers to refinance. We are planning to keep this home as our final destination and stick out the mortgage, so no selling in planning. Current house market value is about $700,000 we owe about $675,000. We got two quotes to refinance one is with a rebate at 3.75% which will keep our loan at the same amount and lower the mortgage payments by $240 a month. However, the other option is to buy 2 points and run the cost for such into the mortgage which would bring our total loan amount to about $700,000 (increase). We would get a 3.25% rate and our would save about $310 every month. My mortgage person advises to go with the 3.75%, so my loan amount does not increase, but I am confused. I am saving more a month and paying less back over the 30 year loan if I increase my loan amount and get the lower rate. I am trying to understand this...AGAIN I am planning on keeping this house, and not selling...so where is the catch? Why might be taking the higher rate and not increasing the loan a better idea vs. increasing the loan, but lowering the payments and paying less back over the lifetime of a loan...?
What are your thoughts...is there any catch that I am not getting...
You want to pay $25,000 to save an extra $130 a month? Just pay an extra $130 a month on your own to create your own payoff at the same amount, and keep the $25k.
I'm missing how 2points adds up to $25,000 but I'm not trying too hard to figure it out, but yes you are right if cost actually do ad up to $25,000 instead of 13,500
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