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Old 06-29-12, 07:21 AM   #1
Bacon
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is refinacing a mortgage really a good idea?

my current rate is 8.9 and I'm thinking by refinancing I could reduce my monthly payments and cut down the long term amount of interest I pay but I'm worried that refinancing is more hype than anything else
the last time I checked my credit scores they were in the 750s/760s
would talking in person to a bank be best or is an online finance lender a possibility?

Last edited by Bacon; 06-29-12 at 07:27 AM.
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Old 06-29-12, 07:32 AM   #2
crankyman
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Re: is refinacing a mortgage really a good idea?

i went through my credit union to lower my 5.9 to 4%. even with closing costs it was well worth it to me.
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Old 06-29-12, 07:59 AM   #3
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Re: is refinacing a mortgage really a good idea?

8.9!?!?

The short answer would seem to be absolutely, don't delay. However, you don't indicate how much equity you have in the home or its loan to value ratio.

We re-fi'd about a year and a half ago and went from 5% down to 4.25%. More importantly we moved from what was a 30 year loan to a 15 year. So, in the end, we are paying $50 more a month than we were but we instantly shaved 8 years off the loan (we had 23 years remaining on the initial 30 year loan and did a new 15 year loan). Calculated out, it will take us around 2 years to "break-even" where the new loan will be where the old loan would have been if we'd just kept making payments on it. The reason for that is the closing costs, etc. that we had to pay.

FYI, I used LendingTree.com and got 4 or 5 great offers and just worked with a couple to narrow down the best deal in terms of rate & closing costs.
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Old 06-29-12, 08:37 AM   #4
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Re: is refinacing a mortgage really a good idea?

8.9? you get that from a loan shark? if you can get down to the the 4% - 5% range, you'll save hundreds of dollars per month. The cost savings benefit will probably only take a few months.
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Old 06-29-12, 08:48 AM   #5
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Re: is refinacing a mortgage really a good idea?

Maybe it was 5.9 I'll have to check my paper work from.1999
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Old 06-29-12, 08:56 AM   #6
GMan2819
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Re: is refinacing a mortgage really a good idea?

Be aware that if you're upside down on the loan, i.e. you have negative equity, the bank will probably require you to come up with enough cash to get back to positive equity.
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Old 06-29-12, 09:06 AM   #7
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Re: is refinacing a mortgage really a good idea?

Quote:
Originally Posted by GMan2819 View Post
Be aware that if you're upside down on the loan, i.e. you have negative equity, the bank will probably require you to come up with enough cash to get back to positive equity.
not necessarily true if he has a loan that qualifies under the HARP program. i have a rental property I just refinanced that is worth less than half of what I owe on it. didn't have to pay anything other than the various fees associated with a home refinance. obviously a YMMV type situation, but definitely worth looking into.
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Old 06-29-12, 09:08 AM   #8
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Re: is refinacing a mortgage really a good idea?

8.9% would have been a pretty standard rate back in 1999. I bought my first home in 2002 and we got a 7% rate which was considered extremely low at the time. If you've had the loan since 1999 then you should have a lot of equity. You should be able to re-fi to a 15 year loan and save money on your monthly payment and on the overall loan (less interest for remaining amount).
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Old 06-29-12, 09:31 AM   #9
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Re: is refinacing a mortgage really a good idea?

I closed my refi yesterday for 3.99% 30 year with no closing costs
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Old 06-29-12, 10:05 AM   #10
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Re: is refinacing a mortgage really a good idea?

We just refinanced from 5.875% to 3.25%. We had 23 years left on the loan, but went to a 15 year for the same outlay every month. So we shaved 8 years of payments off for virtually no cost.
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Old 06-29-12, 10:11 AM   #11
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Re: is refinacing a mortgage really a good idea?

Watch out for PMI, too. I got ref'd with about 97% LTV and didn't have to pay PMI. Though most banks may try to push that on you - find one that doesn't. Did it with Quicken Loans, smoothest refi I ever did. I recommend them.

Edit: also without PMI, you may get a slightly higher interest rate but still should be a great rate low as they are now.
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Old 06-29-12, 10:14 AM   #12
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Re: is refinacing a mortgage really a good idea?

Yeah, I was at 4.75% on a 15-year mortgage for the last 9 years (with 6 years left) and I re-fied with my current bank (WF, with NO fees or appraisals or anything extra) at 3.25% for a new 15-year, but if I pay what I payed on my last mortgage, I'll have my house paid off in less than 5 years, as opposed to 6 years with my previous mortgage. It was a no-brainer.
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Old 06-29-12, 10:33 AM   #13
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Re: is refinacing a mortgage really a good idea?

Does your house get reaccessed when you refinance? I've been paying the same amount for property tax for 12 years. We bought the house for $360. Now it's worth about $600,000. I'm afraid if I refinance, they'd reaccess it and raise the property tax.
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Old 06-29-12, 10:36 AM   #14
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Re: is refinacing a mortgage really a good idea?

Yeah, pretty sure it'll be reassessed.
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Old 06-29-12, 11:28 AM   #15
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Re: is refinacing a mortgage really a good idea?

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Originally Posted by cungar View Post
Does your house get reaccessed when you refinance? I've been paying the same amount for property tax for 12 years. We bought the house for $360. Now it's worth about $600,000. I'm afraid if I refinance, they'd reaccess it and raise the property tax.
The property tax is assessed by the city or county. It'll happen whether you refinance or not.
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Old 06-29-12, 11:37 AM   #16
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Re: is refinacing a mortgage really a good idea?

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Originally Posted by Ranger View Post
Yeah, pretty sure it'll be reassessed.
Mine didn't; not with the new mortgage. For me, it's the the county that re-assess the value each tax-cycle. And while it's gone up little by little over the last 9 years, it's not assessed anywhere close to it's worth. For example - I was originally at $400K, now I'm assessed at $450K, while an exact house like mine on my street just sold for $650K.
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Old 06-29-12, 11:45 AM   #17
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Re: is refinacing a mortgage really a good idea?

Maybe because you got the streamline refi and no appraisal? I mean, some states have a cap on the assessment increase which would be reset after a refi from what I understand.
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Old 06-29-12, 12:11 PM   #18
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Re: is refinacing a mortgage really a good idea?

In answer to the original post, it's a good idea if what you are aiming for is to lower the interest rate.

If you are using it to cash out your equity ... BAD idea.
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Old 06-29-12, 12:29 PM   #19
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Re: is refinacing a mortgage really a good idea?

No hype, you could probably save yourself a ton of money monthly with a refinance and as others have mentioned maybe even shorten your loan term without a huge monthly hit. Why pay more interest than necessary? The only big change in my eyes, is that a refinance can often change a non-recourse loan to a recourse loan.
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Old 06-29-12, 12:48 PM   #20
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Re: is refinacing a mortgage really a good idea?

I was wondering the same. I close on the 12th - going from a 6.8 to a 3.5 saving $250 a month. Saving $75,000 in interest. However, NOW Because of the damned closing costs, I actually owe more than what I bought it for originally. I dont see the savings, but apparently its there. Freaken bank that had my lien doesn't do refinancing in Texas, so I couldn't do a VA Streamline, and had to get an appraisal. My Escrow refund and 2 months nonpayment will be going back into the principle to bring that damned number back down to where it should be.
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Old 06-29-12, 01:13 PM   #21
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Re: is refinacing a mortgage really a good idea?

Quote:
Originally Posted by slop101 View Post
Mine didn't; not with the new mortgage. For me, it's the the county that re-assess the value each tax-cycle. And while it's gone up little by little over the last 9 years, it's not assessed anywhere close to it's worth. For example - I was originally at $400K, now I'm assessed at $450K, while an exact house like mine on my street just sold for $650K.
That's because you're in California. Prop 13 baby!
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Old 06-29-12, 02:03 PM   #22
slop101
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Re: is refinacing a mortgage really a good idea?

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That's because you're in California. Prop 13 baby!
Yeah, but then I have melo-roos, which pretty much doubles my property tax...
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Old 06-29-12, 02:14 PM   #23
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Re: is refinacing a mortgage really a good idea?

If your rates were as high as you said CB, I'd refinance for sure. We refinanced a couple of years ago from a 30 year to a 15. I don't remember the rates, but it definitely went down. Now we can get the house paid off so much faster. But going from an 8+ rate to something in the 4-5 range is a no brainer.
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Old 06-29-12, 02:20 PM   #24
Jacoby Ellsbury
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Re: is refinacing a mortgage really a good idea?

8.9%!? Is this a serious question? Unless your home cost $10K then yeah a refi makes sense.

No mortgage refinance calculators on your version of the world wide web?
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Old 06-29-12, 02:33 PM   #25
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Re: is refinacing a mortgage really a good idea?

Quote:
Originally Posted by Vibiana View Post
In answer to the original post, it's a good idea if what you are aiming for is to lower the interest rate.

If you are using it to cash out your equity ... BAD idea.
Good to know that you're a top notch financial planner. We know zero details -- of his loan amt, income, assets, situation, etc -- yet you find it able that pulling out equity is a bad idea. okay.
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