how much lower would the payments be with the new
refinance? How much $$ TO refinance? will the cost of refinancing be recouped in savings? Have you figured out
if you add two full payments extra a year on the existing mortage how much it would shorten it?

Hi kat. I don't know how much lower the payments would be. I'll ask that when I talk to the bank and financial guy. And you're right - I want to know if the cost to refinance (points, closing, etc.) will be recouped in savings. In fact, I already do make two additional payments a year, so I'm good with that. But I'd like to make payments based on 3.x or 4.x% than 5.25%. I think!

:-)

you need to find out what closing costs are now, they are several TIMES more than they were 11 yrs ago when i got my original mortgage. i just refinanced my mortgage of $68K back out to 30 yrs @ 5.1% w NO closing costs. Chase offered it to me because my original mortgage thru Washington Mutual, was now owned by them but they had no loan paperwork on me (or anyone thru WAMU). Normal closing costs were running $5-$10K and since i'm selling w/in 2 yrs that $$ is coming straight from my profits so i would not refinance even thou i was paying 7.4%. shop around... I am not interested in paying off sooner, i wanted to pay less now. i am very lucky to still be up 200% atleast on my house and plan to sell and buy up.

i have a boss who is refinancing thru SunTrust but has a jumbo 7/1 ARM and either the closing costs have been coming in over $15-20K or banks want $50K applied to the loan to bring principle down out of the jumbo category. his house is a multi million $$ home. he can't find anyone w less closing costs so will pay the $$ and refinance.

i don't think there are many deals out there. look at it this way, banks will make less $$ by refinancing, so they make up for it w closing costs... ~ liz

We close on Monday on our refinance. We are going from 6.75% to 3.25%. Our closing costs are about 2000.00, but we will save over 1000.00/month. I will say that this is the longest time it has ever taken to be "checked out" by the bank--almost 2 months.

I don't know why you want to consider refinancing unless it's just to lower your monthly payment...or you need to remove cash equity from your house value. The average closing costs these days range between $1500 - $2500 depending on your bank requirements.

The other thing to consider...particularly as you're only 7 years away from paying your existing mortgage off...is that a new mortgage payment will be primarily all interest to the bank [they'll love you for that] whereas your payment today has reached the point where you're paying much more towards the principle. If you can afford to double up on payments...do that with your existing mortgage and become mortgage free within the next 3 - 4 years.

That's what I would do if I were that close to paying off the existing mortgage...if I could afford it. I'd love to be mortgage free.

Anne

Do you have any Credit Unions in your area? Also, do not fill out and sign any papers just to get information. Our bank tried that with us a couple of years ago when we bought our car. Dumb person would not even give us any information without filling out papers. All I did was give them our SS # and without notifying us, they put in the loan. They called us to sign papers, and I blew!!!! I cancelled everything in writing, made the loan person sign in writing that we were not applying for a loan, just information. About a month later I got a letter saying sorry we were turned down. I called the main office and said if anything turns up on my credit report, they would be talking to my lawyer. Never heard a thing. Just be very careful. For information they really need nothing especially since they already have your information on file. I am a retired bank person and yes, I have set up and dealt with loans for many years.
From what you have said, I would think about making payments to the principal only. They should be able to do that but you might have to go into the bank and do it. Or find out if you make a payment more than the amount, it the overage will go to the principal. Some payment coupons do have a place for the customer to indicate this. Payment + payment on principal.
Good luck and be careful
Marie

I agree with marie-ndcal. I paid extra on the principal each month and was finally able to pay my mortgage off last month. It's a great feeling!

With 7 years left, most of your interest is paid - either google Amortization calculator or go to your mortgage website. What you will see is that most of the interest has been paid. You need to know a few more facts - the new % rate, the closing costs, but basically what you are comparing is the interest you will pay over the next 7 years compared to the interest, and closing costs of a new loan - which resets with you paying interest first. My take is that with 7 years left, you are better off sticking with the current mortgage and putting the amount you would pay in closing costs toward your principal, or investing it (if you can get a better than 5.25 return.) All that being said - you have to have all the facts to make the comparison.

You could refinance to a lower interest although your interest is reasonable as it is. Not enough data is given to compute an answer.

But for the sake of an example, lets say you can go from you 7yr, 5.25% mortage to a 15 yr at 3%. Since you only owe $55,000, you continue paying off the principle at a 7yr rate and be charged less interest. Now look a the closing cost (points). Will you recoup these costs in 2 to 4 years? If you do, it might be worth the hassle. But first, you must determine the conditions of the new mortage. Make sure that you can pay off early without penalty. Make sure it is a fixed rate and not a variable rate. Next, see if you are required to put money in escrow to pay the yearly taxes. This is money the bank can use for free if they are not willing to pay you interest on it. Balk on letting them have free money, however, you'll probably not win this one and will be saddled with banking cash for taxes.

If it is a good deal, take it. This would give the option of extending you payout to 15 years instead of 7, and it allows you to continue to pay off in 7 years at lower cost.

Do not plan on extending to 15 years. Each year, your house depreciates and you do not want to ever get 'under water' (remaining mortage more than the house would sell for).

If you might change houses in the next 4 years, it probably is not worth the effort. It'll take some time to recoup the closing cost.

Right now, projections are that interest rates will remain low for this year and will not raise much in 2013. But at some time in this Nation's financial fiasco, savers are going to get tired of supporting financial institutions at near zero interest rates and rip their funds out of the banks. If they do this too fast, it could cause a bank collaspe similar to 1929.

As a guess, interest rates will climb if inflation kicks in at over 4%. The change may be fast.

Only you have the best idea of what your circumstances are. With interest rates this low, waiting around a year of two does not pay because are loosing time in which you could be reducing your costs and reducing the time of the benefit.

Only you have the best idea of what your circumstances are.
Wise words there.
If you are struggling to make that house payment, by all means look at ways to make it lower. If you are doing OK - why stretch out the debt another 8 years?
That next 7 years will fly by - how will you feel if you know you could have had that house paid off then? You will look at 8 more years of payments..when it could be free and clear.
If you had 20 years to go anyway, it would be a different story.
I am a dyed in the wool tightwad. Right now I'm cringing because we had to buy hubby a car because I hate making payments.
I wouldn't think about extending a loan unless I was only able to afford rice and beans.

I'm very close to your situation. I had $58,000. left on the mortgage at 5.5%. I decided to take a very low interest equity loan offered at a credit union (2.99%, no closing costs) instead of traditional refinancing. In fact, I close on it Monday. Couldn't have been a simpler process. Because I too am paying lots extra every month to pay down the mortgage, it shaved about 5 months off my timeline. That was worth it for me to do!

Thank you all for your wise words. Yes, i need more info which i will get when i talk to the pros tomorrow. You have given me some good questions to ask.

The only reason I would refi would be to pay less for the money I'm borrowing. As i mentioned. I would still strive to pay it off in 7 years, not 15. However, my ability to do so would depend upon the new payment amount, which i will find out.

I would, of course, rather be paying the bank 3.25% for my money than 5.25%, but there are other factors to consider. I appreciate you taking the time to give me your viewpoints.

You could go with a 120 month loan on your refinance, as we are, instead of 15 year. And you also have to consider that the money you pay as interest on your loan is tax deductible. I believe closing costs are tax deductible too, but I'm not sure about that.

If you have seven years to go on your current mortgage, and are expecting to get a refi at a lower rate, without taking into account the refi and closing costs, it should mean that you have a reduced monthly payment.

Why would you want to tie yourself into a fifteen year span of such obligation? Involving a lot more interest to pay, over those extra years ... and if you pay off early, maybe your lender feels that they have a "right" to that interest that they'd be losing out on.

If you have local credit unions, find out whether you can make a deal with them ... as, the participants being the only owners, they're usually more user-friendly than are banks, owned by outsiders.

In consideration of the huge U.S. government debt (as well as private), and the fact that they are printing money hand over fist ... there's bound to be inflation, and that will mean that, before long, the interest rates will be going up ... with a distinct possibility that they may go sky-high.

Back in the early 80s, Canada Savings bonds were paying 19%, and when I was selling mutual funds in the mid-80s, a number of folks, especially seniors, used to chortle as they recounted what a killing they'd made on such rates.

When I asked them how they liked making about $2,000. - 3,000. per year on $100,000. investment, they looked at me as though I had two heads - told me that I was out of my mind ... crazy!

I told them that, interest income being taxed at top rate, if they were in 25% rate of tax at their top level (which, investment income being on top of their wages or pension, it was), that'd cost them just under 5%, which would reduce their after-tax income to about 14.5% ...

... and did they know what rate of inflation was operational in 1980 - 81?

Almost all didn't know that it was about 12% ... which left them with little net return on their investment!

If you refi at a lower rate ... read the documents carefully, to make doubly sure that they can't increase the rate later, as many of us say that hard times are ahead in our part of the world ... and strong inflation not far off, as well.

Whether you refi or not ... try to get that mortgage paid off as soon as possible ... and if you make extra payments, make sure that the full amount of the extra goes toward paying down the principal.

I suggest that you cut your discretionary expenditures rather heavily and get that mortgage paid off as soon as possible, for those who have no debts in future will be thankful to be so fortunate.

We have some local people who've been paid over $30.00/hour building railway locomotives in what used to be a subsidiary of General Motors until their bankruptcy, prior to which they sold off non-auto business. Many of those workers thought that they were more or less in clover ... until their new owner told them that they'd pay only about $16.00/hour - take it or leave it!

The workers refused ... were locked out ... and now the plant is shutting down - moving production to the U.S. (with gov't. incentives to bring jobs home).

Back when U.S. 70 cents or so bought a Canadian Dollar, the situation was very different for Canadian manufacturers than it is now, when the U.S. Buck and the Canadian Buck are about equal.

Just my $0.02 worth.

ole joyfuelled

When we were in your situation, we started paying extra and paid off the loan early. Banks want to make money, so they will charge you "points" or an early payoff fee. A credit union might be safer. Truly, you are at the point where almost all of your payment goes to principal and not interest, so refinancing doesn't make sense; you will be back to paying interest. Every time we had "extra" money, I added it to the mortgage principal. It is lovely to be mortgage free. My guess is that it will take you five years. Once you start, it becomes a game, and you will want to see how quickly you can do it. Good luck.