10162012, 04:48 PM



Location: Upper East, NY
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The key question is how much do you save per month and therefore when do you make up for the $3,000 upfront cost.

10162012, 05:16 PM



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I currently pay about 1015 per month and i have 27 year and 6 months left on my current mortgage. With the new rate i will pay 844.20. Therefore it will take me 1 year and 6 months to get even. However with new rate i will have another 30 year mortgage. Considering also that i plan to sell the apartment in 5 years the math becomes more complicated taking into consideration the interest vs principal paid for the next 5 years.

10182012, 04:00 AM



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as a general rule you never really want to refinance a 30 year into a 30 year.
in your case your just starting out so the effects of extending the terms wont be to bad . you have to run the numbers to see how it works out as your that close that it can go either way.
take all the interest you paid so far , any closing costs to refi and tack that on to the interest on the new mortgage and see how it compares 5 years later. any on line calculator can run that for you.
in your case your real cost of your home would be like taking a 33 year mortgage with 3 years at 41/2 % interest and 30 years at 31/2%i nterest plus closing costs.
if there are closing costs it may not pay for only 5 years.
your really seeing which way is less interest .
33 years with 3 years at 4.5% and 30 years at 3.5% plus 3000 in closing or just the 4.5% at 30 years.
what was the original mortgage and what is the balance at refi point? i can throw that in for you.
all your interested in is total costs out to 5 years or so. but butbut you really want a worse case scenerio in case you cant sell exactley in 5 years or your plans change.
typically once your into a mortgage for a number of years unless you are planning on paying the same amount each month and retiring the mortgage earlier all most folks end up doing is extending out the terms and paying a whole lot more in interest driving up the total cost of their house.
folks dont realize by cutting payments and extending the terms it cost them a whole lot more in total interest payments.
more years to pay even at lower rates usually work out to the worst deal unless the spread in rates is big enough to offest the additional years.
effectively your throwing away all the interest payments you made prior to the refi and starting over again from scratch as it can take 1622 years or so before you pay down even 1/2 a mortgage's principal .
a 30 year to a 15 year should be the way to go if you want to save money.
the truth is with most folks moving or refinancing every 5 to 7 years, 5 year adjustable rate would have been the best way to go .
Last edited by mathjak107; 10182012 at 05:04 AM..

10182012, 06:50 AM



Location: NY,NY
2,896 posts, read 9,485,550 times
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Quote:
Originally Posted by herewego12345
Hi,
I currently have 4.5 interest rate on my mortgage however rates have fallen down to lower 3.00. I am getting offer to refinance my mortgage with interest rate of 3.500 and closing cost around 3000. Some mortgage agents suggest i should refinance and some don't. What do you think? If i had a rate of 5.5 then it would definitely make sense to refinance but since its only 4.5 then does it still make sense to refinance? I am also planning to sell my coop apartment in 5 years.
Thanks,
Kay

Got a calculator?
Wellll, then, do the math!
Amortize the mortgage (term?) At 4.5 and 3.5, determine the monthly/yearly payment for each rate. Calculate at 60 months or 5 years at each rate.
The difference minus the Closing Costs will be your savings. You decide whether it is worth it or not.
Btw, I haven't been keeping up, but I recently noted that 3% mortgage rates are for 15 year terms.
Here' a site you may fiind helpful:
Mortgage Rates Credit Cards Refinance Home CD Rates by Bankrate.com

10182012, 10:58 AM



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If you have Wells Fargo they can refinance your mortgage for free. They did mine recently and I didnâ€™t pay a dime and the cost was not lumped into the mortgage. WF gave me a credit towards the closing costs that's how I didnâ€™t pay a dime

10182012, 11:51 AM



Location: Sunnyside
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If you were to refinance it, and then still make your current payments I would say it's a good idea. When you sell in 5 years years you'll have that ~200 dollars a month extra in principal taken off your balance, so after 5 years of ~200 a month, that's a pretty decent chunk of change that you'll be getting when you sell.

10182012, 02:52 PM



Location: Upper East, NY
1,145 posts, read 2,901,376 times
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You shouldn't get into the downsides of having 3 more years on your mortgage or higher cumulative interest costs if it is likely you will sell in 5 years. Also, getting into a discussion on that and trying to optimize the lifetime interest gets into other choices like your ability to pay down principal.
If you look at what the principal balance is on the old loan and the new loan in 5 years, the difference is small, under $1,000 by my calculations. The reason is because the percentage of the monthly payment going to principal in a 30yr amortization schedule is so low only 1/3.
So most of your monthly payment savings is in interest saved and the principal balance will be the same in 5 years. SO you should go ahead and do the refi you will make back the closing costs in interest saved over 1824 months. IF you end up staying a couple of extra years, you will save even more.

10192012, 08:05 PM



Location: Manhattan
24,769 posts, read 34,762,753 times
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Quote:
as a general rule you never really want to refinance a 30 year into a 30 year.

I may be naive at this Mathjac, but how about a 7% into a 4%?

10202012, 04:47 AM



98,780 posts, read 97,980,906 times
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you have to run the numbers.
as an extreme example suppose your in the 29th year of your 30 year mortgage and your at 7%. you refinance into another 30 year mortgage at 4%.
you saved a few hundred in interest over the last year but added a few thousand in interest to the cost of your house.
you can see that clearly makes no sense unless you were going to pay it off in a year or two. but then again you would not be refinancing into another 30 years,your refinancing into another 1 or 2 years if you paid it off.
each example will be different depending how far into your existing mortgage you are, the rates and the closing costs.
30 year to 15 year works great, usually 30 year to 30 year do not.
refinancing and paying the old amount so you shorten up the length may or may not work depending how far into your originol mortgage you are. .
when you refinance your really just changing the length and terms of your mortgage and the bottom line is what will all that interest cost me by the time i paid off this house.
some folks refinance into another 30 year and invest the difference they save each month getting a higher return then the interest they pay. that can work too but human nature rarely has anything saved invested elsewhere very long in my experience.
most folks are very poor at saving excess money they come upon. there always seems to be to much month at the end of the money no matter what we save.
Last edited by mathjak107; 10202012 at 05:24 AM..

10202012, 08:26 AM



Location: Manhattan
24,769 posts, read 34,762,753 times
Reputation: 12292


I think a likely scenario might have been someone 1015 years into a 30 year mortgage at a very high rate converting into currently very low rates no matter what the term.
Even a 30 year to 30 year conversion seems very likely to be desirable.
Remember that the average 30 year fixed rate mortgage in 2000 was 8.5%.

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