Refinance question (loan officer, interest rate, 30 year fixed, fees)

[jp03]

I am looking to refinance but am not sure what dollar amount to use to see if its worth it.

My loan was originally at 6.375 % for 133,700. We paid toward the principal $20,000 extra this year. I still owe $109,200. We would like to refinance at 4.875%. Our current loan payment is 834 per month. The new loan would be 590 a month. Both are 30 year loans. Problem is our initial loan will be paid off well before 30 years. Its at about 18 years left. The new loan would be for 30. Our loan officer is trying to tell us the difference between the 2 payments is 244 dollars a month and at that rate we will make up the money quickly. But if I am correct, this is not true. The new loan is 30 years again. The other loan would have been paid off in 18.

Does anyone know how to properly calculate the savings in the refinance?

Closing costs on a new loan will be $2,100.

Any help is appreciated

[VictorBurek]

Let's assume you dont refi, you will than pay the current payment until paid off in 18 years. If you refi, but keep making the same payment, your home would be paid of in less than 16 years. that will save you about 26 payments of $834 or $21,684.

However, why not do a 15 year mortgage, where the rate would be around 4.375 making your total payment $828. So for a little less than your current payment, you would pay off home in 15 years.

[jp03]

Originally Posted by VictorBurek

Let's assume you dont refi, you will than pay the current payment until paid off in 18 years. If you refi, but keep making the same payment, your home would be paid of in less than 16 years. that will save you about 26 payments of $834 or $21,684.

However, why not do a 15 year mortgage, where the rate would be around 4.375 making your total payment $828. So for a little less than your current payment, you would pay off home in 15 years.

Thanks..its ironic you say that. My wife wants us to secure a lower payment monthly in case this economy forces a job loss but continue to pay the same amount. . We have a 4.625 lock on the 15 in case but the quarter point didnt seem worth it. I am still debating that. I still cant figure out how to calculate the amount of savings each month. I KNOW its not 244 dollars for sure.

[VictorBurek]

That is not a bad idea that your wife has. A nice thing with the 30 year fixed is it allows you to prepare for worse and strive for best. Meaning, you can pay the 30 year off in 15 years but if something happens, you can always go back to the 30 yr payment and not send extra.

Also, with the rates you are quoting, you probably are not paying any origination. I would suggest that you pay 1 point so you can get a lower interest rate. IF you dont pay the point, you will end up paying it over and over in the form of a higher interest rate.

Rates vary from state to state and based on your fico score, but several lenders today are offering 4.25% for a 15 year mortgage and 4.5% for a 30 year mortgage. To qualify, you must have a fico score over 740, and pay the closing costs and 1 point loan origination/discount/broker fee.

Post the fees you are paying and several people here can look them over to make sure you are not paying any junk fees. If you are keeping this home long term, pay a point, it will pay for itself with the lower rate interest savings in about 3 years.

[Debsi]

Didn't Victor answer your question in his first paragraph?

[ufcrules1]

Victor got it right on his second post. Go with the 20 year, and have the flexibility you need. If you want to pay extra here and there to principle, you will be able to
pay it off in 15 years. This is a no brainer, go for it!

[jp03]

Originally Posted by VictorBurek

That is not a bad idea that your wife has. A nice thing with the 30 year fixed is it allows you to prepare for worse and strive for best. Meaning, you can pay the 30 year off in 15 years but if something happens, you can always go back to the 30 yr payment and not send extra.

Also, with the rates you are quoting, you probably are not paying any origination. I would suggest that you pay 1 point so you can get a lower interest rate. IF you dont pay the point, you will end up paying it over and over in the form of a higher interest rate.

Rates vary from state to state and based on your fico score, but several lenders today are offering 4.25% for a 15 year mortgage and 4.5% for a 30 year mortgage. To qualify, you must have a fico score over 740, and pay the closing costs and 1 point loan origination/discount/broker fee.

Post the fees you are paying and several people here can look them over to make sure you are not paying any junk fees. If you are keeping this home long term, pay a point, it will pay for itself with the lower rate interest savings in about 3 years.

Ya know I am paying .25 point for the 4.825 and the 1 point was never mentioned. I will ask. I appreciate all your help. I did figure out how to do the cost analysis and I would save about 80 dollars a month not 244. Still worth it as the break even point is 2.5 years or so. People have to realize you also have to calculate in the tax break difference in the lower rate if you itemize. This brings the monthly savings down.

Thanks again.