Am I calculating this correctly?? Re refi

[riverwed070707]

Was just curious what our ROI would be if we were to refi our house. Best rate w lowest closing costs I could find is 3.5% w $1800 closing costs. Current mortgage is at 5.5%.

Current payment=$1250 including PITI +PMI
New payment would be=$1030 for a savings of $220/mo

So put simply it would take 8 months to recoup the cost of the refi but if we refi say Dec. 16 (just need to schedule the appraisal and sign the papers but wanted to make sure i was making a good choice), then we wouldn't make our first payment til Feb. 1, correct? Essentially, doesn' that also save me a Jan. payment of $1250? And if that's the case, then don't I really recoup my costs in under 3 months?? Am I missing something here? This seems too good. We aren't sure how long we're going to be in the house but even if its 8 months it still seems silly not to do it since it will bring our payment down a good chunk. I'd really like to do a 15 year but it just isn't feesible now. Hoping the lower payment will allow us to knock out all student loans this year, pay off a 0% that comes due in Dec 2013 and build some savings.

[kv968]

Was just curious what our ROI would be if we were to refi our house. Best rate w lowest closing costs I could find is 3.5% w $1800 closing costs. Current mortgage is at 5.5%.

Current payment=$1250 including PITI +PMI
New payment would be=$1030 for a savings of $220/mo

So put simply it would take 8 months to recoup the cost of the refi but if we refi say Dec. 16 (just need to schedule the appraisal and sign the papers but wanted to make sure i was making a good choice), then we wouldn't make our first payment til Feb. 1, correct? Essentially, doesn' that also save me a Jan. payment of $1250? And if that's the case, then don't I really recoup my costs in under 3 months?? Am I missing something here? This seems too good. We aren't sure how long we're going to be in the house but even if its 8 months it still seems silly not to do it since it will bring our payment down a good chunk. I'd really like to do a 15 year but it just isn't feesible now. Hoping the lower payment will allow us to knock out all student loans this year, pay off a 0% that comes due in Dec 2013 and build some savings.

Recouping the refi costs in about 8 months is right but why would your first payment be in Feb if you closed in Dec? Even the loan did start in Feb, it's not like that payment has gone away, it'll just be another month longer at the end of the loan.

How long was the original loan, how far into were you and what is the new one? You said you wanted to do a 15 yr. but couldn't so did you replace a 30-yr loan with another 30-yr?

[Petunia 100]

Recouping the refi costs in about 8 months is right but why would your first payment be in Feb if you closed in Dec? Even the loan did start in Feb, it's not like that payment has gone away, it'll just be another month longer at the end of the loan.

How long was the original loan, how far into were you and what is the new one? You said you wanted to do a 15 yr. but couldn't so did you replace a 30-yr loan with another 30-yr?

It is always this way with a new mortgage. If she closes in December, then interest through December 31st is included in the closing charges. On Jan 1, there is no interest accrued, so no payment is due. On Feb 1, one month of interest has accrued, so the first payment is due.

Riverwed, I believe you are looking at it correctly. You will have the opportunity in January to save/invest/prepay mortgage the money which would have paid your mortgage payment.

[riverwed070707]

It is always this way with a new mortgage. If she closes in December, then interest through December 31st is included in the closing charges. On Jan 1, there is no interest accrued, so no payment is due. On Feb 1, one month of interest has accrued, so the first payment is due.

Riverwed, I believe you are looking at it correctly. You will have the opportunity in January to save/invest/prepay mortgage the money which would have paid your mortgage payment.

Recouping the refi costs in about 8 months is right but why would your first payment be in Feb if you closed in Dec? Even the loan did start in Feb, it's not like that payment has gone away, it'll just be another month longer at the end of the loan.

How long was the original loan, how far into were you and what is the new one? You said you wanted to do a 15 yr. but couldn't so did you replace a 30-yr loan with another 30-yr?

What she said re payment. You're right the payment will not have gone away but we will not have a payment in Jan. meaning I have an extra $1250 which I'm essentilaly looking at it like its reduced our closing costs because we won't lose that money from savings. Orig loan was 30 years. We're 5 years in and yes we're replacing it with a new 30 year. I realize this is not entirely ideal but considering the increased cash flow its going to free up to take care of our other debt and the short ROI period it seems worth it to me. If rates are still low, we could even refi to a lesser term in a year or 2 and we will still come out ahead. Seems like a win win to me if I'm calculating everything correctly.