NFT: Question for the Mortgage Home Refinance experts

In your favor. It really can't go much lower. Tenth of a point? Not worth the chance. I'd take it and not look back.

Personal experience story. I was awaiting mortgage approval on the eve of Gulf War I. Rate at that time was 6.5% The morning after the bombs started dropping, the rate had gone overnight to 8.5%. That's what I was approved at about a week later.

don't wait.

1. the type of mortgage program you need (conventional, FHA, subprime, jumbo, etc)
2. your credit scores
3. your loan to value ratio

So, there really is no way of knowing whether your rate is competitive because we do not know the answer to #2 and #3 and we also do not know what points or origination you are being charged along with that rate.

I likely have lenders who can get your mortgage rate lower. Plus, you could get that rate on a 30 yr fixed which means you would just send extra payments when you want without having that REQUIRED larger payment.

I'm not an expert but I just completed a refinance about 1 month ago. 30 year at 2.50 with apr of 2.79.

Shop around a bit for the best rate (make sure that you compare the apr also...as that includes all the fees besides the base interest rate.

Also 25 year is kinda of odd...if u get a 30 and pay a little extra month you will pay it off earlier.

Odd to get a 25 year. Assuming credit above 780 you can probably find something slightly better but so many factors go into it, it’s hard to say. No reason at all to go back to a 30 year. You have already paid a ton of interest over the last 5 years, why add 5 years of interest? Just cutting $200 a month over 25 years is going to save you $60k ex closing costs over the 25 years. Pretty good situation to be in.

That sounds like a good rate. You cannot necessarily count on rates staying low and loosing a rate for another 10 points is not worth it. However, there deals out there in terms of credits and costs. Usually best to go through part of the process with a few sources and shop around. But that rate is good.

In comment 15152328 GMEN46 said:

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Odd to get a 25 year. Assuming credit above 780 you can probably find something slightly better but so many factors go into it, it’s hard to say. No reason at all to go back to a 30 year. You have already paid a ton of interest over the last 5 years, why add 5 years of interest? Just cutting $200 a month over 25 years is going to save you $60k ex closing costs over the 25 years. Pretty good situation to be in.

you need to see what today's rate is on a 30yr. I am suggesting that you can get the same or better rate on a 30yr mortgage.. but then just make the extra payments.

What you should also consider is sending that extra $200 per month. continue making the same payments that you are making now.

Just to add a few thoughts to the mix....

Will your home appraise such that you won't be paying PMI ?? That's the worst insurance going -- you want to be at 80% LTV.

Rather than sending in that extra $200, consider putting it in a 'slush fund' every month. For any unexpected repairs or bills, or whatever. It will grow into a nice kitty over the years. You can always pay the bank off early.

I recently refinanced our vacation hoe and got a 20 year at 2.5%. I really didn't have much desire to go through the hassle but the rates were too good to not take advantage of.

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At the same place is most likely going to be higher than the 25 year rate. If you shop around at different places the 25 should always be lower than the 30 year. A 20 should always be less than a 25 etc. now different banks/brokerages will have different rates, but the shorter maturity should always have a lower rate at each bank/brokerage

I was 4 years into a 30 year and refinanced down to a 20 year at 2.5, the 25 year was 2.625 and the 30 year was 2.75, does that make sense?

I agree you can make extra principal payments no matter what the maturity and you will in effect reduce the total amount of interst paid and then the rate in effect becomes lower.

its at about 2.5 you would save many years off your mortgage at about what you pay now. Never understand why people don't want to lower the amount of years. I have one house paid off and working on another with 10 years left at 2.75

In comment 15152425 mdthedream said:

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its at about 2.5 you would save many years off your mortgage at about what you pay now. Never understand why people don't want to lower the amount of years. I have one house paid off and working on another with 10 years left at 2.75

$500 a month difference on a $400k loan between 15 and 30 years. $500 is a lot for most people, especially if they are investing on top of whatever they are doing with their 401k. Long term that math is in their favor but it isn’t peanuts each month.

In comment 15152328 GMEN46 said:

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Odd to get a 25 year. Assuming credit above 780 you can probably find something slightly better but so many factors go into it, it’s hard to say. No reason at all to go back to a 30 year. You have already paid a ton of interest over the last 5 years, why add 5 years of interest? Just cutting $200 a month over 25 years is going to save you $60k ex closing costs over the 25 years. Pretty good situation to be in.

Because mortgage interest is deductible off your tax return. It’s a personal decision about how much leverage one is comfortable with what their highest marginal tax rate - but let’s say you have a 1 million mortgage (house was bought before 2017 so it’s grandfathered at that larger balance), you live in NY and your marginal rate on that 28k interest is 32% plus 7% to Ny state. You are effectively taking on a 1.6% loan - which is a) better than any unsecured loan rate you’ll ever get, b) only slightly higher than rate of inflation and c) most importantly over 30 years If you take those savings and invest in the stock market or even in muni bonds .... you’ll beat that cost by a lot.

So... that’s why.

The person who started this post isn’t looking to max leverage they are asking a very simple refinance questions.

If one was trying to arb the mortgage a 30 year would not be the move, it would be a 5, 7 or 10 year IO that would be the move.

Double check your facts on the grandfathering post 2017 tax changes. I thought a refinance caused the max to be $750k not $1 million.

Additionally munis bonds right now would be a terrible way to arb any mortgage rates. The short end of the curve is paying like 25-35 bps if you stay high quality and intermediate is like 60-80 bps. That just would not make sense, it would be a losing game.

with the lowest payment, then you double pay each month with the extra to the principle. If you pay the extra principle the interest will drop each month with more of the payment going to principle on each payment and less to interest. Yes, it will only be a small amount each month in the first few years, but it accelerates quickly there after. You would likely make a 30 year mortgage into 18 or 19 years and save 50% on the interest over the life of the loan. (They have calculators online that will tell you what additional payments per month do to reduce your overall interest paid.) Any amount extra saves in the end.

If you come on hard times, you stop the extra payment and your monthly payment would still be less than a 15 or 20 year.

In comment 15152506 section125 said:

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with the lowest payment, then you double pay each month with the extra to the principle. .................. If you come on hard times, you stop the extra payment and your monthly payment would still be less than a 15 or 20 year.

That was the point I was making. Plus, his rate on the 25 year is not that great and he can likely get a 30yr fixed at that rate.

Bear in mind that rates have risen across the board in the last month. What people got a month ago isn't necessarily indicative of what's available now.

In comment 15152503 GMEN46 said:

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The person who started this post isn’t looking to max leverage they are asking a very simple refinance questions. If one was trying to arb the mortgage a 30 year would not be the move, it would be a 5, 7 or 10 year IO that would be the move. Double check your facts on the grandfathering post 2017 tax changes. I thought a refinance caused the max to be $750k not $1 million. Additionally munis bonds right now would be a terrible way to arb any mortgage rates. The short end of the curve is paying like 25-35 bps if you stay high quality and intermediate is like 60-80 bps. That just would not make sense, it would be a losing game.

It’s a minor detail and just an example but I can get 2.2% on a triple-A rated muni bond fund currently. I’m sure longer duration than ‘intermediate’ though. It was just an example. Point of the post is .... 1.6% after tax is a really cheap loan.

As for the initial post he’s asking a finance question on a general message board so whether you think a response is within the parameters is a personal view. People always quote pre-tax rates, what matters is after tax.

Good point on refi being at 750k now though. That’s good to know — I plan to recast in two years anyway but I had been considering the IO, unfortunately to your point I guess that’s unfortunately off the table for me for another 6 years.

In my situation, we have a target date to retire and it corresponded to when our house would be paid off. For that reason, we opted to go with a 25 year mortgage instead of a 30 year.

Our main goal was to still have the 25 years left to lower our monthly payment, which is why a 15 year mortgage wouldn't work for us.

I opted to go ahead with 2.85% that my lender locked in for us for 60 days, which is important since I didn't want to risk it going any higher during this process.

I also have an agreement with them, to check the rates again on the 25 year fixed mortgages 3 days before closing. If the rates have drastically dropped (0.1% or more) they can adjust the rate for us heading into the closing.

Which then became a no brainer for us, since max we're locked into 2.85% and if interest rates drop by closing, we can get it adjusted.

However, if the cost of the loan/points/closing is more than say $5-8k, like how much are ya saving? This is also dependent on the loan value....food for thought.