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When doing a refi, costs break down into three areas:
Lender Fees (this includes origination fees and points, sometimes they give their fees different names, origination fees, processing fees, underwriting fees, but ultimately it's all the same - lender fees)
Settlement Fees (These are typically title fees, escrow fees, appraisal, and government fees)
Prepaids (HOA fees, property taxes, and insurance). I would assume if you're not doing impounds (having your loan payment include property taxes and insurance) then this amount would be zero.
Lender fees the lender would have full control and knowledge of those to communicate to you.
I've seen some pretty wonky settlement fee estimates that were way off. Typically there is a lenders title insurance policy, an escrow fee, a notary fee, maybe some overnight mail fees, government recording fees, and appraisal.
Settlement fees should be fairly close between different lenders. Lender fees can vary greatly.
I'd be looking for a line item breakdown so you can see if you're comparing apples to apples. Yes the rate will be higher on cash out refi and charging more for a duplex seems understandable. Paying points gets you a lower rate so if you're OK taking a 3% rate then it should have less or possibly zero points. It's all a trade off of how much you want to pay upfront versus over the life of the loan.
Your bigger concern should be that you are turning what is 14 year mortgage right now into a 30 year mortgage. You are going to pay, way, way, WAY more in interest over that extra 16 years than you are in closing costs. Like exponentially more.
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I would also agree that after refinancing (even if they did a 30 year), to take all the cash flow from the rental and put it towards the mortgage. Based on information above, she would still pay it off in < 15 years.
Your bigger concern should be that you are turning what is 14 year mortgage right now into a 30 year mortgage. You are going to pay, way, way, WAY more in interest over that extra 16 years than you are in closing costs. Like exponentially more.
If you want to refinance, refinance to a 15 year.
Also, now is a great time to do a cash out refi. Banks are worried about the fallout of the economic situation and are not very eager to hand out any kind of loans against your house. Many banks have even stopped doing HELOCs altogether right now.
Completely disagee.
Refinance to a 30 year, but double up on payments to pay as if it's a 15 year. Effective interest rate will be lower like a 15 year.
Then if you hit hard times and need more cash flow, you can pay 50% of that payment and save cash flow if needed.
Cash flow is king...don't lock yourself into a 15 year mortgage with strict payment amounts that is not flexible over time.
I had a 15 year, will only do 30 year mortgages from now on, especially with rates so low.
Thanks for the breakdown and for the 15 year mortgage suggestion. I was thinking about going back to a 30 year only because the payment is more affordable. I can always pay more and shorten the length that was. I plan on being in this house probably for as long as I am alive, so I want to make the right decisions. It involves a lot of money of course, but I want to be sure I can make my obligations and have enough money to make improvements to the property. Thanks again.
Thanks for the breakdown and for the 15 year mortgage suggestion. I was thinking about going back to a 30 year only because the payment is more affordable. I can always pay more and shorten the length that was. I plan on being in this house probably for as long as I am alive, so I want to make the right decisions. It involves a lot of money of course, but I want to be sure I can make my obligations and have enough money to make improvements to the property. Thanks again.
Find a good mortgage broker. They will work for free. A good one will break down exactly what the total cost of the mortgage will be, including all closing costs and interest over the life of the loan. You can get a good idea with online calculators as well.
Even if you pay your own property taxes and insurance, if they are due close to your closing date, the lender or title company may insist on paying them for you. Or you can pay them before closing and show them a receipt.
OP give Costco a try. If you are not a member they have a deal with mortgage brokers and lenders for lower fees. You can look at rates there without being a member.. PM me if you are interested and I will provide you the info do get a rate if you are not a member. What I have seen is 30 year rates are not much different, ie higher than 15 year rates. Maybe a 1/16th of a percent difference. You can always pay more than the minimum, well you can if there is no prepayment penalty which is common with most mortgages these days. I mean its common to have no prepayment penalty
The HELOC idea or cashing out to pay for improvements can vary a lot by states due to different ways states reacted to the 2008 real estate driven crash. No one knows the future for sure, but I do not see interest rates climbing until the economy is back to a larger degree than now or the foreseeable future. So getting a HELOC or second mortgage to fix up the things yoyu plan to do then after its in place and funded consolidate both the HELOC or second and your first mortgage to one mortgage to lower interest costs of both
Thanks for the breakdown and for the 15 year mortgage suggestion. I was thinking about going back to a 30 year only because the payment is more affordable. I can always pay more and shorten the length that was. I plan on being in this house probably for as long as I am alive, so I want to make the right decisions. It involves a lot of money of course, but I want to be sure I can make my obligations and have enough money to make improvements to the property. Thanks again.
I always do 30 year. What I do is round up the monthly payment to the nearest hundred And make one additional payment to principal at the beginning of the year and if I feel like it one at the 6 month or triple up beginning of the year. One payment two to principal
This schedule gives me the long term shortening of the loan time by 8-10 or ( more if I choose to pay to principal)years if there is some financial issues I can simply make my regular payment only if I ran into any trouble. You can AKWAYS ps moto principal which lowers the amount of interest they charge. With 5 year loans you dint have the fall back of that lower payment.
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