Should I refinance my mortgage now? (refinancing, loan, new house)

[Basic2020]

Hello all - I bought a house last year in May. Loan amount $970k, 10-yr ARM, Interest rate 3.85%. Now, I am thinking of putting down another 100k and refinancing for a loan amount of $870. I am getting a refinance rate of 4.5%. Can you please guide me and let me know if it's meaningful to refinance? I am trying to bring down my monthly mortgage payments.

[yesmaybe]

Higher rate def not worth a lower payment.

[porterhouse]

I’d keep your current loan and just put the $100k toward extra payments.

[simplexsimon]

Originally Posted by Basic2020

Hello all - I bought a house last year in May. Loan amount $970k, 10-yr ARM, Interest rate 3.85%. Now, I am thinking of putting down another 100k and refinancing for a loan amount of $870. I am getting a refinance rate of 4.5%. Can you please guide me and let me know if it's meaningful to refinance? I am trying to bring down my monthly mortgage payments.

It does not make sense to refinance to a higher rate. Yes your payment would be a little lower, but that's because it's a smaller loan amount.

In fact, if you pay down $100k to refinance at the higher rate you'd only save $50k over the life of the loan, meaning you'd be $50k poorer in the end than if you kept your current loan and the $100k in a bank account earning nothing.

10 years is a long time. Hang onto your current loan and your cash and see if rates become favorable again.

[fabfan84]

No do not do this

[oceangaia]

The only way that would make sense is if you expect the ARM to increase well past 4.5%.

[newenglandgal123]

If you're no longer comfortable with the payments you have, maybe sell and buy a less expensive home?

[Basic2020]

I love my new house and I am comfortable with the payments. But I have some cash and thinking if it's sensible to refinance. But from hearing your advices, I understand that it's not a wise option.

[r_p]

Don't do it. The higher interest rate + closing costs will offset everything. The best option right now is to put the $100k in a high-yield savings account for the extra ~$300-400 month which you can use to pay the lender as extra principal every month.

[GeoffD]

You can’t answer this without knowing the specific terms of the ARM. When can the interest rate adjust? Is there a cap on interest rate adjustments? I had an ARM in the late-1980s when that was normal. The contract had specific terms limiting the hikes over the first five years. It’s not like the rate could shoot up to 10% overnight.