Too soon to refi? (insurance, loan, credit score, 30 year fixed)
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I have literally made one payment on my mortgage. It's a 30 year fixed at 5.25%. Rates seem to be dropping fast. Should I even consider a refi at this point? I have a good credit score (about 800).
I generally like your advice, but without seeing how much the OP paid for all the mortgage related stuff and how much another lender would also charge for these very duplicative expenses and what sort of time the OP has to own this property / what sort of break even the lower rate might present I thing it is important to stress the difference betweeen "yes consider it" and "Yes, SLAM DUNK, do it" -- too often responsible mortgage brokers SAY the former and eager / inattentive borrowers seem to hear the latter...
It's a $200K mortgage. I paid no origination charges with my initial mortgage. I paid about $2,500 in closing costs for appraisal, title insurance and a few other misc. items.
Not really sure what my closing costs would be to refi. I'm guessing aroun 3K based on some things I have read. I plan on being in this house at least 5 years.
I generally like your advice, but without seeing how much the OP paid for all the mortgage related stuff and how much another lender would also charge for these very duplicative expenses and what sort of time the OP has to own this property / what sort of break even the lower rate might present I thing it is important to stress the difference betweeen "yes consider it" and "Yes, SLAM DUNK, do it" -- too often responsible mortgage brokers SAY the former and eager / inattentive borrowers seem to hear the latter...
I agree Chet... thus the reason i said you should consider it.. and not definitely do it.
It's a $200K mortgage. I paid no origination charges with my initial mortgage. I paid about $2,500 in closing costs for appraisal, title insurance and a few other misc. items.
Not really sure what my closing costs would be to refi. I'm guessing aroun 3K based on some things I have read. I plan on being in this house at least 5 years.
$200,000 mortgage at 5.25% 30 year fixed is a principle and interest payment of $1104. Paying just the closing costs and no points would probably get you to 4.75% today. Assuming you roll the $3000 in costs into the new mortgage, you would now have a $203,000 loan at 4.75% making payment $1058. A refinance would save you about $50 per month but cost you an additional $3000. You could figure break even on $3000 divided by the $50 per month savings which comes to 60 month break even... way to long in my opinion unless you know for certain you will be there longer.
Empirical studies show that people who refi'ed are more hesitant to refi again. Theoretically, when you closed shouldn't affect your next refi decision.
A few years back we refinanced before we made any payments. It was during the boom and there were no closing costs to get a lower rate. Only about $500 transfer tax which we made up for in 6 months. It is all about the math. There are many online calculators that will do the math for you. Look for a break even point of less than 12 months.
I agree that during the "hey day" there was BRUTAL competition and originators were capable of swallowing the upfront costs due to incentives that the wholesales were giving back, thus making true "no downside" refi far too easy. More than a few lenders were also more than willing to waive documentation for loans that were especially fresh, thus the risks soared.
Now I know of no lender that will truly look the other way when it comes to documentation nor are they able to be compensated by upstream parties.
Refi will not have break even points that are so short...
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