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any thing to keep in mind when considering a refinance on mortgage? I know not PM... but.

2ltdjorn2ltdjorn Posts: 2,329 ✭✭✭✭

the forum has quite a few financial savvy individuals who may be willing to share some insight.

moving into IRRRL refinance for mortgage.

anything to look out for, to ensure you are getting hit with unnecessary fees. is it common to prepay escrow.

currently we owe 214,000. property is valued at 310,000. we have a 24 years 6 mo left on mortgage at 3.75% rate. our payment is 1637/month.
looking to roll into a IRRRL to get a 2.5% rate at 30 years. would reduce our payment ~ $240/month but would put savings towards principle which would allow us to pay off mortgage at 20 years.

the amount owed would increase by ~ 4900 (fees) and prepaid ~ 6900 (escrow, prepaid?) with principle increasing from ~214000 to 221000.

WTB... errors, New Orleans gold, and circulated 20th key date coins!

Comments

  • derrybderryb Posts: 36,017 ✭✭✭✭✭

    credit unions and some banks in my area are eating the closing costs. shop around. Prepaid escrow is normal to ensure enough funds to cover upcoming taxes and insurance.

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

  • blitzdudeblitzdude Posts: 5,284 ✭✭✭✭✭

    Shoot for a 15yr, you can knock 9 1/2 years off your current mortgage and you'll barely up your current payment, maybe $1-200 per month. The sooner you realize financial freedom the better.

    The whole worlds off its rocker, buy Gold™.

  • bronco2078bronco2078 Posts: 9,961 ✭✭✭✭✭

    @blitzdude said:
    Shoot for a 15yr, you can knock 9 1/2 years off your current mortgage and you'll barely up your current payment, maybe $1-200 per month. The sooner you realize financial freedom the better.

    agreed I remember I had 25 years left at 8% on a 30 year refi at I think 5.8 % 20 year , lowered montly by 200 shaved 5 years off then made a half payment every 2 weeks instead of 1 per month and knocked 3 more years off the end.

    it actually caught me by surprise when it was over , instead of a bill I got a check B)

  • shorecollshorecoll Posts: 5,445 ✭✭✭✭✭

    If you can get 2.5% for 30, I'd do that and follow your plan. Nothing beats flexibility. Depending on your age, I might not even pay early, I'd look at investing those funds...you can always pay it off early if you change your mind.

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  • derrybderryb Posts: 36,017 ✭✭✭✭✭
    edited November 26, 2020 7:33PM

    You're below the 80% loan-to-value limit so don't get suckered into or pay for PMI.

    @2ltdjorn said:

    the amount owed would increase by ~ 4900 (fees) and prepaid ~ 6900 (escrow, prepaid?) with principle increasing from ~214000 to 221000.

    You should be receiving a check for what is in your current escrow account when you pay of the current mortgage. There is likely a way to apply it to your new loan escrow balance at closing. The last thing you want to do is finance that 6900 for 30 years - it will cost you 2,915.00 in interest over the life of the loan. If possible take a short term 6900 loan from a family member or a bank and immediately pay it off when you receive the escrow refund from your current mortgage. I would imagine your new lender has a way to apply the refund directly to your new loan's escrow.

    What is your escrow balance compared to the 6900 required for the new loan's escrow?

    Also, will your property taxes be reset at a new higher property value due to the refinance? It may explain a need for a higher escrow requirement than you currently have.

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

  • derrybderryb Posts: 36,017 ✭✭✭✭✭

    You can always pay a long term loan off early at no expense. It will cost you (closing costs) to change a short term loan to a long term loan (lower payments) should your financial situation require it some time in the future.

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

  • 3stars3stars Posts: 2,278 ✭✭✭✭✭

    Two questions: how long do you plan to stay in the house, and at what point do your new closing costs break even based on what you save per month? If you plan three more years but costs break even in four it’s a bad deal. What we did was just make extra principle payments every month. Since the interest paid versus principle is highest at the beginning of the loan, the extra payments reduce the interest paid. No extra fees to do so, and if your loan has online payments it super simple.

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  • bronco2078bronco2078 Posts: 9,961 ✭✭✭✭✭

    @3stars said:
    Two questions: how long do you plan to stay in the house, and at what point do your new closing costs break even based on what you save per month? If you plan three more years but costs break even in four it’s a bad deal. What we did was just make extra principle payments every month. Since the interest paid versus principle is highest at the beginning of the loan, the extra payments reduce the interest paid. No extra fees to do so, and if your loan has online payments it super simple.

    agree , refinancing which ads time is a negative , when i refinanced they pushed hard on the 30 year because of the supposedly lower monthly payment . To which I said I can do math buddy , I will be paying that lower payment for an extra 120 months over choosing the 20 year.

    Paying extra is always a good idea even just rounding up helps if your payment was 950 a month then giving them 1000 even can knock months off the end.

    Regardless you may not survive to the end of the loan but your heirs , if you care particularly might be better positioned to keep the house instead of selling it. In other words , if you had 4 kids the lower the remaining note the easier it might be for one or two to buy out the others and not force a sale at a bad time

  • DrBusterDrBuster Posts: 5,300 ✭✭✭✭✭
    edited November 28, 2020 5:48AM

    We refi'd from a 30 to a 15 a while ago (were in the 30 about 3 years), I believe we're under 10k left on the loan and are about ~3 years ahead of the 15 on full payoff. If you can pull it I'd go shorter vs a longer loan for the ultimate savings long term.

  • derrybderryb Posts: 36,017 ✭✭✭✭✭

    given that a car loan now has terms up to seven years, how long before we see a 50 yr. mortgage?

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

  • SimpleCollectorSimpleCollector Posts: 536 ✭✭✭✭✭

    I agree with comment that you should aim for a 15 year mortgage...things always happen and you may not always prepay....lock in the shorter term for a few bucks more now.

  • derrybderryb Posts: 36,017 ✭✭✭✭✭
    edited November 28, 2020 11:47AM

    @SimpleCollector said:
    I agree with comment that you should aim for a 15 year mortgage...things always happen and you may not always prepay....lock in the shorter term for a few bucks more now.

    As long as you are comfortable with the fact that you are locking in the commitment for a higher monthly payment. I personally paid off a 30 year mortgage early with extra payments at my time of choosing. There were months of unexpected expenses that made me glad I had the lower 30 year payment.

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

  • MjwagsMjwags Posts: 105 ✭✭✭

    Recently refi'd to a 20 yr loan. Paid about $5,000 in costs to shave 3 plus years off our old loan. Our payment will be the same as it was previously.
    I don't see an advantage to a longer term even with smaller payments just to pay the loan off early. You paying 2.5% on your home loan and you'll be lucky to get 1% from the bank on your savings. If you need the extra money for something other than the loan then I'd understand.
    We bought an extra .25% off our rate which didn't cost much and will pay for itself in about 3 years, worth considering.

  • derrybderryb Posts: 36,017 ✭✭✭✭✭

    What has not been pointed out is that the longer the loan, the lower the payment appears to comparatively be over time. My first mortgage payment appeared to be so much higher than my last mortgage payment thanks to inflation and the declining value of money.

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

  • dennis1219dennis1219 Posts: 267 ✭✭✭

    Just completed a refinance. Lowered interest from 4% down to 2.15% on a 15 year. I had $150,000 and 21 years left. I am making bi- monthly payments which lower the payoff to 13 Yrs and 9 month’s. I chose not to finance any cash out or the closing costs, but it was very reasonable at only $2,800. I plan on paying this off in 8 years and then retiring. Good luck and shop around. There are great deals out there. (OH... the refinance will save me $40,000).

  • MsMorrisineMsMorrisine Posts: 32,039 ✭✭✭✭✭

    2.15% !!??

    did you pay down the rate with points?

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  • softparadesoftparade Posts: 9,266 ✭✭✭✭✭
    edited November 28, 2020 7:51PM

    @SimpleCollector said:
    I agree with comment that you should aim for a 15 year mortgage...things always happen and you may not always prepay....lock in the shorter term for a few bucks more now.

    I went 15 year FIXED in 2009 after buying my second house and I was nervous about it at first but now 11 years later with just 48 payments left I know I made a TREMENDOUS choice. Whew!

    ISO 1978 Topps Baseball in NM-MT High Grade Raw 3, 100, 103, 302, 347, 376, 416, 466, 481, 487, 509, 534, 540, 554, 579, 580, 622, 642, 673, 724__________________________________________________________________________________________________________________________________ISO 1978 O-Pee-Chee in NM-MT High Grade Raw12, 21, 29, 38, 49, 65, 69, 73, 74, 81, 95, 100, 104, 110, 115, 122, 132, 133, 135, 140, 142, 151, 153, 155, 160, 161, 167, 168, 172, 179, 181, 196, 200, 204, 210, 224, 231, 240

  • jmski52jmski52 Posts: 22,265 ✭✭✭✭✭

    Shoot for a 15yr, you can knock 9 1/2 years off your current mortgage and you'll barely up your current payment, maybe $1-200 per month. The sooner you realize financial freedom the better.

    This, if it doesn't put you too close to a budget squeeze at some future point. Like derryb mentions, the lower payments can provide flexibility and you can still accelerate some payments and pay the loan off sooner if your income increases along the way.

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  • drei3reedrei3ree Posts: 3,430 ✭✭✭✭

    Do whatever you can to get it paid off ASAP. There is nothing more liberating than having money and not owing money!

  • derrybderryb Posts: 36,017 ✭✭✭✭✭
    edited November 30, 2020 4:10AM

    @drei3ree said:
    Do whatever you can to get it paid off ASAP. There is nothing more liberating than having money and not owing money!

    It makes no sense to have high interest rate debt (credit cards, auto loans) and not a low interest rate mortgage. A mortgage is the last debt you want to pay off. It is really the only justifiable debt. Until one can print his own money everything else should be purchased with money one has or not purchased. One should be making payments into savings for the next car. That is the meaning of financial freedom.

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

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