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Well you need to look at how long you plan to own the home and how much the total cost of the refinance is to you. Keep in mind that most people only own a home for around 5 years. Refinancing from 5.75 to 4.85 would save you around $84 a month in interest on a 150k home or $5040 over the 5 years. Get a quote for the total amount of points and fees for the refi and decide if its worth it. Personally I think WF ripped you off if you paid 1.3 points to get a 5.75%.
Be advised: I've heard from some people that are currently in the middle of refinancing that the interest rates you see on websites are not the rates being offered for refinancing, they are rates offered for new mortgages only. The interest rates for refinancing are slightly higher. I'm not saying this happens at all lenders, but many of them are playing this game.
How much equity do you have in the home? That makes a difference also. I believe you can only refinance for 80% of the homes value. So they will do an appraisal (which will probably cost you $$) to determine the value of your home. If you do not have at least 20% equity, you probably won't qualify. At least that's what I have found when checking it out. Also, does the refi have closing costs? If so, you might be able to roll it into the refi, but you need to take those costs into consideration to see if it's right for you.
Well you need to look at how long you plan to own the home and how much the total cost of the refinance is to you. Keep in mind that most people only own a home for around 5 years. Refinancing from 5.75 to 4.85 would save you around $84 a month in interest on a 150k home or $5040 over the 5 years. Get a quote for the total amount of points and fees for the refi and decide if its worth it. Personally I think WF ripped you off if you paid 1.3 points to get a 5.75%.
This guy is right about the refi. Figure out how much you'll save, and how much you'll pay in costs to refi. Then if you plan to live in the home that long it would be fine. The post from the former loan processor in inaccurate. The points differential doesn't matter.
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It depends on much more than how much the rate goes down. For those that mentioned doing the math to find the break even, Kudos to you. I would also add to not forget the points originally paid to buy down the rate, although that gets a little more complicated.
For example, let's say that the original loan amount was $100,000 and the rate without points was 6.25%. At 6.25% the principal and interest payment would be $615.72. At 5.75% the P&I payment is $583.57. The interest savings is $32.15 a month. At 1.3% points that is a $1300 cost. 1300/32.15=40.43 or about 40 1/2 months before the interest savings break even with the cost. Being that you have only been in the home a month (probably have not even made your first payment yet) I would say let's just round to 40, with no savings being realized yet.
At 4.875% your new P&I payment is $529.21 for an interest savings of 54.36 a month. Let's say that with that point there are about 2% in closing costs that must be paid as well. Call it $3000 total costs. 3000/54.36=55.19 or about 55 months to break even. Now add that 55 months to the 40 months from the original break even and you have 95 months, or 8 years for the interest savings to equal the total costs paid from the original loan plus the refinance. If you feel that rates will not go any lower (I personally feel that they will based on historical and current mortgage bond spread data) and that you will be in the home for more than 8 years then it may make sense to do the refi.
Also, to clear up a couple of things in this thread. Lenders will lend above 80% loan to value but you will see a hit to the rate plus you will need to pay mortgage insurance. Purchase money mortgages and rate and term refinance mortgage most times will have the same rates all things being equal. It's when when loan scenario variables such as property type, occupancy type, credit score, and loan to value start to change that you will see different rates. I don't disagree that many lenders (and some of the guys that "compete" on various other websites) sometimes do not deliver on their online quotes and may happen more often than not although I cannot say one way or the other.
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What about for jumbos?
