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First off, where do you start when shopping around? There are SO many banks out there that it is sort of overwhelming knowing where to start. I contacted a couple of companies and they said they offer 4.375 with no closing costs but they are with companies I have never heard of, actually I think most are mortgage brokers. Should I go through one or go directly to the banks?
When is buying down with points worth it? I have gotten some conflicting advice. For example, my sister went with Bank of America and she bought down her interest rate to 3.75 from 4.375 but she is paying like $8000 in closing costs and point buydown on an $150k mortgage. Would it be worth it for me though? I currently am at 5.375 and have $117,000 left on my mortgage. I have no idea how long I will be here. I don't have immediate plans to move but you never know with life.
Some more information that needs to be considered - how many years left on your current mortgage, what's your current monthly payment and how much equity do you have in your house? Also, what would be your reason for the re-fi - lower monthly payments or shorter term?
It may be that refinancing is not really an option, but if it is, you'll just have to collect information and run numbers. If you are going to pay money up front for lower monthly payments like your sister, you'll have to determine the break-even point. For example, if you are saving $100 month but paying $8K in closing, it will take six and a half years to break even (not considering any interest you might gain on the $8K). If it's unlikely that you'll be in the house that long then it's not a good move.
I have over 50% equity in my house and I would like to take out a slightly bigger mortgage for some things that need to be done to the house (needs to be painted, new carpet, etc.). I currently have 23 years left on a 30 year mortgage. I've looked into home equity loans and home equity lines of credit but the interest rates are higher so I don't see how they would be a better option. I don't want to take anymore money out of savings, that is why I thought that it would be better to get another mortgage.
In my sister's case, she went from a 30 year to a 15 year and she is three years in on a 30 year morgage. How do you figure your breakeven point in that situation? They also have no immediate plans to move. I'm just not a math person and I'm having trouble wrapping my brain around the calculations.
You should not be mortgaging for paint/carpet, They only thing you should mortgage is thing that will last as long as the mortgage. Do you think the paint/carpet will last 23 years? Because in 8-10 years when you repaint/carpet you will still be paying for the last paint job. If you cant aford the paint/carpet now, think of of Home Equ line of credit and pay it off in 3 year or so. (I also dont like using HomeEqu for consumables). Because it secured by your house. If you can't pay for it they take your house. If you put it on a credit card and can't pay you just have bad credit. But you dont lose you home.
Shortening the term complicates it a bit. In her case, the overall amount she will save will more than be worth the $8K. It also means she had the money up front to do it. In your case, you figure your house is worth $235K or better. The home equity loan can be worth it when you don't have the cash for closing costs. Since you mainly need a cash infusion for home improvements, this may be good option, especially if you shorten the term, which will lower the rate.
If you go with the mortgage, keep a couple of things in mind. If you refinance for a longer term (back to 30 years) your monthly costs will be lower but you'll pay more over the life of the loan. If you took out a loan for, say, $140K at 4.375, your monthly payment would be around $700 (not counting any escrow for taxes or insurance). How does that compare to your monthly cost now, and would that give you enough to do the work you want to do? If it's favorable, and you could get it with no closing costs, then it might make sense.
Two cautions - things that sound too good to be true usually are. If they are saying no closing costs, realize they might mean that the cost is simply rolled into the loan. If it cost you $5k in closing for the above rate and they tacked it on to the loan amount, you would pay about $725 a month instead. Also, realize your appraisal may come in lower than you expect, putting you on a tighter margin. You must have put a ton of money down initially to have over 50% equity after seven years.
I did put a ton of money down. My situation is a bit more complicated than most. I was widowed in 2003 at a young age and as a stay at home mom. I put down over 50% at the time and house values have gone up since then (although they have come down since 2008). There is no doubt in my mind that in my neighborhood I could easily sell for $280,000, probably more like $300k. I just recently went back to work but it took me a bit longer than I expected to find a job after being out of the workforce for 5-6 years and I unfortunately had planned to go back to work in 2008 when my son started school. Really bad timing, obviously but that is life. It took me two years to find a job but I found one back in January. So no, I do not want to take any more money out of savings. I know that typically you should not put costs like that into the mortgage, but right now I cannot afford $800-1000 more in payments if I got a home equity loan.
I'm a mortgage broker in Florida but some of your questions I can answer. Often, a small mortgage broker will give you a better deal. I have given 3.750% on 15 year loans with money back, no points, no admin fee, no processing fee so BOA made out well on that deal.
Here's a suggestion - there is a mortgage forum under real estate on this site. Pose your question there; there is a guy by the name of Victor Burek who posts often and I believe he is in NC.
I personally think it's a great time b/c once rates go up, they will go up. If you want, e-mail me for more info.
I talked more with one of the mortgage brokers and they said that they basically pay the closing costs. I am sure they get some sort of commision to offset the $3-4000? I still haven't gotten much further other than talk to a few representatives at BoA and Suntrust and this broker that says they off 0 closing costs...
Mortgage rates are so low now, there's little difference between the 15 and 30 year. She should have gotten the 30 years and overpaid the payments when she wanted to, now she's forced to pay more.
Theoretically, if she paid the 30 year like a 15 year, she'd pay it off in almost the same time.
i just got offered 3.99% refi, no points, closing costs paid for by broker on a 30 yr. i took 3.875%, $1,000 of closing costs paid for by broker. no points for either rate.
i can't see how $8,000 in points was worth it on $150k mortgage. i don't even think it's worth calculating the breakeven point on that. i'd consider no more than 1 point i think but you have to calculate the breakeven point.
lots of tools to do that on financial website like bankrate.com
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