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Do not rush. Do your homework. You can make additional principal payments and you can make them between scheduled payments. If anything does not go according to Plan A (sickness, lay off, ...) you have a relatively small payment at 30 versus 15. Have you already broken even or did you finance your closing costs? Your banker wants to eat - how will you pay your refi? What does it really cost you to refi and how long will it take to break at least even?
With good credit you get approved to the point of being house poor:>(
Are you able to eat tax and insurance increases which seem to be pesky regular things, save for unforeseen maintenance and repairs (roof, a/c, ...) and the scheduled mortgage payment for a 15?
I found myself unemployed twice. Being able to cut back on "want" is hard. Cutting back on "have to" is very hard.
Last edited by Threestep2; 08-02-2016 at 12:06 PM..
I just refinanced from a 30 year at 5% to a 20 year at 3.62%. I'll pay the house off 4 years sooner this way, and my monthly payment is lower. I had to pay $2400, and I'll get back $1800 from the escrow account from the original mortgage. I refinanced through USAA and it was a fairly simple process. If you're eligible for USAA, you might try them.
Good questions. I'm not sure exactly how everything works. If my current mortgage is 1104, I'd assume a 15 year would put it around 1550. I may be way off, though.
I need to figure out all the math, but the amount of interest even for my cheap 175k house is extreme. Anything I can save will help.
OP, this should probably be in the MORTGAGE subforum of the REAL ESTATE forum; you can ask a mod to move it.
So your current rate on your 30-year loan is 4.0%. What interest rates are you looking at for a 15-year loan, and what would the closing costs be?
You can probably go to your own bank's web site, put in your figures (current balance, 15-year loan wanted) and it will SHOW you what your new payment would be at the 15-year rate and will probably tell you the closing costs too (at least my banks' web sites do that). That info will give you specific dollars to compare.
My bank (Lake Sunapee Bank in NH) currently has a rate of 2.625% for 15-year loans with closing costs ~$2,000. I will likely refinance myself, if I can get my act together!!
Rather than do an official mortgage change, just pay $1600 each month, with that extra $500 going directly to your principal. This way your mortgage gets paid off more quickly, but if you have a sudden drop in disposable income due to layoffs or medical problems, you won't be STUCK making that higher payment while you are struggling to make ends meet.
This is the best way to do it. Just make sure to tell the mortgage company each month that an additional X dollars should be applied to principal. This gives you huge flexibility.
Rather than do an official mortgage change, just pay $1600 each month, with that extra $500 going directly to your principal. This way your mortgage gets paid off more quickly, but if you have a sudden drop in disposable income due to layoffs or medical problems, you won't be STUCK making that higher payment while you are struggling to make ends meet.
We refinanced into a 15-year mortgage just over a year ago, and I live in constant worry about one of us being laid off. I sometimes wish we had just opted to make higher principal payments on our own instead (which we had already been doing, but in a smaller amount than what we pay now).
This is what we decided to do. The tiny bit lower interest rate was not worth the substantially higher payment. We pay an extra $500 per month an an extra payment or two at the end of each year. We will pay it off in less than 15 years if we stick to that religiously, but we have already had months where the ability to make a lower payment has save our tails. This is especially critical if you have children.
My bank (Lake Sunapee Bank in NH) currently has a rate of 2.625% for 15-year loans with closing costs ~$2,000. I will likely refinance myself, if I can get my act together!!
When we refinanced we discovered those rates are typically teaser rates. If your credit score is 799, you make four times the amount of your mortgage each year, and you have 50% equity in your home, you will get that rate. For the rest of us, that teaser rate will jump to 3.65 or higher and suddenly the savings are di-minimus. Maybe your bank is unique and you will actually be able to get that rate (or maybe you have the qualifications that no one else seems to have).
When we refinanced we discovered those rates are typically teaser rates. If your credit score is 799, you make four times the amount of your mortgage each year, and you have 50% equity in your home, you will get that rate. For the rest of us, that teaser rate will jump to 3.65 or higher and suddenly the savings are di-minimus. Maybe your bank is unique and you will actually be able to get that rate (or maybe you have the qualifications that no one else seems to have).
They are the rates for someone with "excellent" credit, yes, but that's defined as 760+, which many people have. The bank is a small local bank in New Hampshire, and IIRC they keep their loans (they don't sell them on the secondary market) and service them themselves.
When I got my current mortgage with them about 4.5 years ago, I put down just 5% and still got their best rate (the rate published on their site). I don't remember what my credit score was back then, but my ratios were excellent as I had very little other debt -- I DO understand that those things matter too.
Maybe they are unusual in that people CAN actually get the rates that are published! YMMV, of course.
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YMMV, of course.
