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I am doing a refi on my house and I am trying to decide between three offers. My home is worth about 700K or so. All offers are from major institutions, approximately equally well known and credible. All are conventional loans. I've left insurance and tax escrow payments out because they're the same for all loans.
My credit rating is currently poor for reasons I won't go into. It will recover during the next year, but by then I don't know where the interest rates will be. I am saved by the relatively high value of my home. I also have a lot of other assets, so my default risk is low.
My annual gross income is somewhere around 80k. Even option A is difficult for me to pay with my other expenses, but with a disciplined budget, I can manage the payments for any of the three.
Option B:
Term: 24 years
Interest rate: 3.75
Loan amount: 317,000
Monthly principle+interest: 1,670.93
Closing costs: 16,834, including 14,640 in loan costs, plus 3,694 in other costs, + 1,500 in lender credits
Cash to close: 1,378
(with biweekly payments, payed off in 22 years)
Options C:
Term 20 years
Interest rate: 3.875
Loan amount: 310,000
Monthly principle+interest: 1,858
(With biweekly payments, payed off in 17.5 years)
As you can see, in option B the interest rate has been bought down and the cost has been folded into the loan by increasing it by 7,000.
Does anyone have an opinion about which way to go?
I am doing a refi on my house and I am trying to decide between three offers. My home is worth about 700K or so. All offers are from major institutions, approximately equally well known and credible. All are conventional loans. I've left insurance and tax escrow payments out because they're the same for all loans.
My credit rating is currently poor for reasons I won't go into. It will recover during the next year, but by then I don't know where the interest rates will be. I am saved by the relatively high value of my home. I also have a lot of other assets, so my default risk is low. These statements are contradictory.
My annual gross income is somewhere around 80k. Even option A is difficult for me to pay with my other expenses, but with a disciplined budget, I can manage the payments for any of the three. Clearly, this answers your question. Remove as much doubt as possible and go with Option A.
Option B:
Term: 24 years
Interest rate: 3.75
Loan amount: 317,000
Monthly principle+interest: 1,670.93
Closing costs: 16,834, including 14,640 in loan costs, plus 3,694 in other costs, + 1,500 in lender credits
Cash to close: 1,378
(with biweekly payments, payed off in 22 years)
Options C:
Term 20 years
Interest rate: 3.875
Loan amount: 310,000
Monthly principle+interest: 1,858
(With biweekly payments, payed off in 17.5 years)
As you can see, in option B the interest rate has been bought down and the cost has been folded into the loan by increasing it by 7,000.
Does anyone have an opinion about which way to go?
My credit rating is currently poor for reasons I won't go into. It will recover during the next year, but by then I don't know where the interest rates will be. I am saved by the relatively high value of my home. I also have a lot of other assets, so my default risk is low. These statements are contradictory.
These statements are only contradictory if you consider the credit rating an accurate reflection of credit worthiness. Generally speaking, I consider FICO scores to be, perhaps, better than nothing, but not much more. I didn't want to go into it, but the hits to my FICO score resulted from two situations: confusion over separating finances and obligations from my ex-wife during my divorce; a fraudulent business partner who stopped making payments on a loan which was attached to me because of our business arrangement, ran up 25K on one of my business lines of credit, and stole 150K from me and fled the country with it. (By the way, can anyone recommend an affordable and reliable hit man?) By the way, the ********* had an excellent FICO score when we went into business together. The reason for the refi is to roll the stolen 150K into my mortgage. My default risk is low because my house is worth twice the loan, and sold for about the loan amount even at the bottom of the real estate meltdown, which is when I bought it. I also have financial equities and retirement funds worth enough to pay off the entire mortgage about twice over. The last thing I want to do is lose my assets to pay off a mortgage, but even under the most difficult circumstances, it's hard to imagine how I could actually default on the loan.
Quote:
My annual gross income is somewhere around 80k. Even option A is difficult for me to pay with my other expenses, but with a disciplined budget, I can manage the payments for any of the three. Clearly, this answers your question. Remove as much doubt as possible and go with Option A.
I think you are right. I also compared the three options on a mortgage calculator with extra payments and I found that the three options are almost identical to taking the Option A (30 year) and paying an extra each month. In other words, Option B is virtually the same as Option A with 200 extra a month toward principal (except that my loan amount is lower if I need to pay it off early), and Option C is virtually the same as Option A with 380 a month in extra payments. In view of this, I think Option A is the winner.
I also compared the three options on a mortgage calculator with extra payments and I found that the three options are almost identical to taking the Option A (30 year) and paying an extra each month. In other words, Option B is virtually the same as Option A with 200 extra a month toward principal (except that my loan amount is lower if I need to pay it off early), and Option C is virtually the same as Option A with 380 a month in extra payments. In view of this, I think Option A is the winner.
Your observation is correct, the 24 year loan and the 30 year loan are probably the same rate. If you asked about paying the same cost on the 30 year , the extra $7000 that you are building into the loan, the rate would probably be 3.75% on the 30 year.
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