Refinancing Again.. Maybe.

[nck4857]

Hello All,

Here's the deal. I was screwing around online the other day, saw an ad on TV for Quicken Loans. Went to their website and did the online chat thing. Long story short, I have an appraiser coming tomorrow. If we get appraised for what we think we can, I'll be able to get a 15yr 3.75% mortgage.

I refinanced about a year and half ago, but only my 80% loan, from 6.875 (ouch) to 5.25%. We were unable to do the 2nd mortgage, which is still at 8.125% (double-ouch). The original plan was to aggressively pay off the 2nd this year, but since I can possibly get them combined to 3.75%, why not!?

I'm probably going to have to come up with ~$18k for closing, which includes paying down our current loan enough to get the equity required. Closing costs and everything are going to run a little under $3k and I have a promotion through my College Alumni that will pay me $500 when I close. I realize I should have shopped around more, but I figure even if I pay a little more than I should, I'll still see plenty of savings from ditching the expensive 2nd mortgage.

Income/increased payments are really not a problem and I've considered (I think) all the pros and cons. We will also be able to go back to throwing money at retirement/savings, instead of throwing everything at the 2nd mortgage. I will be using a lot of my emergency savings for the closing, but can build that back up quickly and worst case can use my Roth if I absolutely have to.

Any input or thoughts? Guess it all depends on the appraisal for now!

[MonkeyMama]

My only input is to consider a 30-year-loan. You may be able to get 4% for 30 years. This would still be of a HUGE advantage, but would not tie up your cash flow quite as much.

Depends on the big picture and your cash flow, but I see far too many people committing to 15-year mortgages that are way too tight. With the 30-year - let's face it - 4% is AWESOME and you can always pay extra principal in good times. You just aren't tied to that extra high payment in bad times.

[nck4857]

Yeah, that's why I never really considered a 15yr loan when we refinanced last year. I guess my main reasoning to now going to the 15yr is that I've paid down all debt besides the mortgage and will be getting another heft pay raise within the next 6-12 months. Even if worst case I lost my job, we could still get by on my wife's salary.

That being said, I am going to ask my Loan guy tomorrow what they could offer with a 30yr refi.

Thanks, I guess I'll have to see what we appraise at first and then see if there are any other options.

[disneysteve]

First, I highly recommend Quicken. We used them several years ago when we refinanced and used them again this past November when we refinanced again. We are now in a 15 at 3.99%. Excellent customer service. Had closing at our kitchen table in under 30 minutes.

Second, although that is all people talk about, 15 and 30 are not the only loans out there. Many lenders offer 20 and 25 year loans also. I'm not sure if Quicken does or not but it is something to consider if 15 makes the payment a little too high and 30 stretches things out too far, though as MM points out, you can always pay extra. We have no intention of keeping our 15 for that long. We pay about $2,000/month extra and will probably pay it off in 3 years or so.

[nck4857]

It makes me feel better to hear good things about Quicken. I guess I'll see how the appraisal goes tomorrow!! I'm going to have to pay PMI, also, but I'm going to save so much with the lower interest that I guess it'll be worth it until I can ditch the PMI.

Will see how tomorrow goes!

[Hector]

Seems like you are not funding your retirement accounts. Is it?

[GREENBACK]

My only input is to consider a 30-year-loan. You may be able to get 4% for 30 years. This would still be of a HUGE advantage, but would not tie up your cash flow quite as much.

Depends on the big picture and your cash flow, but I see far too many people committing to 15-year mortgages that are way too tight. With the 30-year - let's face it - 4% is AWESOME and you can always pay extra principal in good times. You just aren't tied to that extra high payment in bad times.

I definitely second your advice.

[nck4857]

Seems like you are not funding your retirement accounts. Is it?

My problem is/was that I was putting everything towards retirement, instead of paying down debt. I'm still putting 12.5% (10.5% goes into 401k whether I contribute anything or not plus 1% to get a 1% match) into retirement after pulling way back. So right now I'm not funding my retirement accounts to where I want to, but will be shortly after getting this debt paid down. I should be able to max out both our Roth's also by the end of the year, even after re-saving the money put down for the total closing costs for the refi.

The appraiser came today, hopefully hear back tomorrow whether or not I can move forward anyways.

By the way, I've been running numbers all afternoon and this refi will save a boatload of money for only another $130/month. It's pretty interesting to see the numbers.

I'll let you know what I hear back tomorrow.

[Frugal]

On our first house loan, we locked in 4.25% for 30 years when rates were still low. I did not think you could go much lower than that.

[disneysteve]

I'm still putting 12.5% (10.5% goes into 401k whether I contribute anything or not plus 1% to get a 1% match) into retirement

No. You are NOT putting 12.5% into retirement. You are putting 1% into retirement. Your employer is putting 11.5% into retirement. That is NOT the same thing.

Here's why. If YOU were putting 12.5% of your income into retirement, that would mean you were only living on 87.5%. Currently, however, you are living on 99% of your income. I would boost YOUR contribution up to 15% not counting any company match and then work from there.

[jpg7n16]

My only input is to consider a 30-year-loan. You may be able to get 4% for 30 years. This would still be of a HUGE advantage, but would not tie up your cash flow quite as much.

Depends on the big picture and your cash flow, but I see far too many people committing to 15-year mortgages that are way too tight. With the 30-year - let's face it - 4% is AWESOME and you can always pay extra principal in good times. You just aren't tied to that extra high payment in bad times.

No. You are NOT putting 12.5% into retirement. You are putting 1% into retirement. Your employer is putting 11.5% into retirement. That is NOT the same thing.

Here's why. If YOU were putting 12.5% of your income into retirement, that would mean you were only living on 87.5%. Currently, however, you are living on 99% of your income. I would boost YOUR contribution up to 15% not counting any company match and then work from there.

I'd 2nd everything from these two posts. Sums up everything I wanted to say.

[nck4857]

I'd 2nd everything from these two posts. Sums up everything I wanted to say.

I agree, also.. I'm still waiting for the appraisal to come back, then I'll see where we're at with that. With the 15yr mortgage, I'll be between 12-15% mortgage/gross pay per month. Actually leaning towards a 30yr now and just accelerating the payments.

As far as retirement goes, I just lowered it about a month or two ago in order to pay all debt (except mortgage) off. As soon as I get the mortgage refinanced I'm immediately going back to fully funding Retirement as I was before, just with no debt.

So basically waiting for appraiser and by the way, Quicken sent me a "revised" application last night upping the origination fee by almost $1k and charging me $443 for points on the mortgage rate-which was already supposed to be locked. Not happy, but I'm not bringing any of it up until after I get the results of the appraiser. I did, however, get a 3.5% quote today with lower costs, so I'll have to weigh that against having to redo the appraisal, ect.

Thanks for the input so far!

[cschin4]

I think a refi can make sense. But in general, i am a bit suspicious of the refi game where people seem to spend a lot of time and effort and cost in doing refis when instead, i think there would be a better focus spent on just paying down the original principle and focusing on paying that down. Refi costs money. And, often it encourages one to add more to the loan for other things such as home remodel and so forth. Find a good rate and then stick with that and focus on paying down.

[scot184]

You don't need to refinance to the 15-year if it's going to push you to the limit. Perhaps going with a 30-year and making 15-year mortgage payments would be a better move.

That way you'll still be able to pay it down quickly. I'd also look beyond Quicken for a deal on your mortgage...I'm sure you can do better elsewhere and get that rate without any money out of pocket. Try a broker or two...shop around regardless.