Archive through July 16, 2003
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TV ClubHouse: Archives: Should I Re-finance??: Archive through July 16, 2003

Pamy

Saturday, July 12, 2003 - 08:14 pm EditMoveDeleteIP
We are going to refinance our home but I wanted to get some feed back from the great people here!
We currently have a VA loan with 7.35% interest, we can refi for 5% interest. BUT..with all the costs our loan will go up 10,000!! We are not going to pay anything out of pocket(thus the reason it will go up 10,000..2400 of which we will get back at closing)
Included in the 10,000 is a 3599.00 charge by the lender to offer us the lowest rate plus 895.00VA funding fee.
I think I remember Suze Orman saying that you take how much you will save each month (in our case we will save 259.00 per mo)times it by 12 months (3108.00)to figure our how many yrs it will take to recoup the cost of the refi and if you plan to stay in your house that long(we do)even if you save 1 dollar it is worth it because we are paying more to the principal each month due to the lower interest rate.
Is that right??? What do you all think?

Pamy

Saturday, July 12, 2003 - 10:36 pm EditMoveDeleteIP
bump..I was so hoping some of you would have some ideas/advice.....

Rabbit

Saturday, July 12, 2003 - 10:58 pm EditMoveDeleteIP
Pamy, where is the rest of the 10K?? The points which you say are $2400 are usually the largest item.

How much longer do you plan on staying in your house?

Even if you are going to stay just a short time you probably should refinance, but you should look for a loan that hase a higher stated rate, but no points if you are might be moving in 2 years or less.

Pamy

Saturday, July 12, 2003 - 11:05 pm EditMoveDeleteIP
Thanks Rabbit!!!, we plan to stay here at least 5 yrs maybe longer. Fees are
Origniation 1737 (covers admin costs)
title ins 800
interest adjustment 1107(could be a little less depending on closing date, this goes with the money to pay off old loan)
tax/insurance escrow 1749 (which we would pay even if we didnt refi)
plus the ones I mentioned above.

Rabbit

Saturday, July 12, 2003 - 11:21 pm EditMoveDeleteIP
If you are staying for 5 years or more I think you should refiance (my non-professional but experienced opinion) but shop around!! Make a spreadsheet of the different costs and compare. Remember APR is what counts not the stated rate.

When Mware recovers from his weekend debauchery he might have more to add.

Tabbyking

Sunday, July 13, 2003 - 09:24 am EditMoveDeleteIP
the points and fees for closing sound exorbitant. sometimes you can get only a .5 higher rate for no points. even at 5.5 (which we have) rather than the 7.0 you currently have, you will save about a hundred dollars each percentage point in monthly mortgage payments. putting that 10,000 into the loan means you get 10,000 less when you sell, than you would if you sold right now. it's just 'gone', but something you now have to pay for... it would also maybe raise your payments right up to where you already are to put another 10k into what you already pay on!
let's say maybe your payments go down by 150 bucks a month. divide 10k by that 150 (you are 'saving') and you will see how many months are going to be spent just paying for that 10k. it comes out to 66+ months just paying for 10k. so, as the above poster commented, if you are not for sure going to be there for 5 or more years, look for something else, without the high points. shop around, as some companies are competing for refi's. good luck!!
when we refinanced, we made sure not to go with any that had points.

Pamy

Sunday, July 13, 2003 - 09:47 am EditMoveDeleteIP
Thanks Rabbit and Tabby. I am going to shop around some more. This loan is a VA loan. I know their are some regular loans w/less fees but we would have to pay PMI (which you do not with a va even if you dont have 20% equity) We bought in 2000 and I have made 1 extra house payment to the principal each yr, the house values out here are rising but the first loan guy I talked to wasnt sure what our house would be appraised at, our house is the only 2 story with a back guest house in the area so it is hard to appraise.

Juju2bigdog

Sunday, July 13, 2003 - 10:52 am EditMoveDeleteIP
Pamy, you are essentially paying $10,000 in closing costs. I would almost say that is highway robbery, but having lived in California for five years, I know they do things a bit different there. Still, the smartest thing you can do is shop around a lot.

You may already know this, but usually in the business section of the Sunday newspaper there is a section showing the names of the mortgage companies with the lowest rates for that week. You might try calling several of those. Is there any way on earth you can get yourself up to the 20% level of not having to pay PMI? Whenever we have bought houses, we have always tried to make it to the 20% threshhold, as I consider PMI pretty much money down the drain for the homeowner. All PMI does is protect the lender.

Grooch

Sunday, July 13, 2003 - 11:08 am EditMoveDeleteIP
Pamy, I sent you an email. :)

Pamy

Sunday, July 13, 2003 - 11:21 am EditMoveDeleteIP
Thanks Juju...I agree about the PMI, great idea about the paper
Grooch..thanks!! I emailed ya back

Tabbyking

Sunday, July 13, 2003 - 02:56 pm EditMoveDeleteIP
pamy, i am in california, too. the 10k is definitely highway robbery! when they do comps, they usually find homes within 1 mile of your house. there must be another 2 story, maybe even one with a guest area, somewhere in that mile each direction from you!

Pamy

Sunday, July 13, 2003 - 03:03 pm EditMoveDeleteIP
Thanks Tabby. You are right, there are some 2 stories within a mile but none have a guest house, and technically this house was advertised as a 5 bed 4 bath(so it would be classified as single family), so I will have them run comps on a 5 bedroom, thanks for reminding me of that!!

Weinermr

Sunday, July 13, 2003 - 03:13 pm EditMoveDeleteIP
Pamy,

You know I'm in Southern California too. The closing costs you've described are very high, especially given the competitive loan environment that exists today. I'm sure you've done plenty of loan shopping already, but I bet there are other lenders out there that would fight for your business and not charge you quite so much for it.

I also have some familiarity with Southern CA real estate, and appraisals of Southern CA real estate. I do understand the unique nature of your property, but I also think a qualified appraiser will be able to find suitable comps in your area. Although the lender will hire the appraiser, you're paying for it, and have the right to be sure the appraiser has all the information necessary to appropriately appraise your property.

I've also done some informal playing around with some of the numbers that you've given, and I think you may find that even with PMI, a conventional loan with reasonable closing costs may cost you less money than the VA loan that does not include PMI, and will still give you the savings in monthly payments that you're looking for.

Although there are hundreds of lenders out there, including those online, I've personally had success using www.lendingtree.com They will find up to 4 lenders who will compete for your business, and you can talk to, and negotiate with any of those particular lenders to deal with your specific situation.

It's a great time to refinance. Go for it!

Pamy

Sunday, July 13, 2003 - 03:25 pm EditMoveDeleteIP
Thanks Weiner!!! OMG! I totally forgot about Lending tree.com!!! My financial idol, Suze Orman, talks about them, I even have a magnet right here staring about me with lendingtree on it!!! Thanks so much, I knew you guys would come thru!!

Juju2bigdog

Sunday, July 13, 2003 - 08:02 pm EditMoveDeleteIP
Aha!!! I KNEW Weinermr was just the person we needed here, but I didn't want to put any pressure on him.

Yay Weinermr! Good luck, Pamy.

Pamy

Sunday, July 13, 2003 - 09:36 pm EditMoveDeleteIP
Lendingtree is great!!! I all ready have gotten 2 offers and they are way lower!!!! I am going to be checking into everything and getting more details but thanks to all of you I feel much better and I am so thankful I asked you guys before I said yes to the loan guy yesterday!!!!!
Lendingtree even had a free service that gives your homevalue...mine was WAAY higher than I even thought!!! wahoooo!!!
Thanks to everyone, you all are the best!!!!

Juju2bigdog

Sunday, July 13, 2003 - 11:11 pm EditMoveDeleteIP
Just goes to show you, Pamy - before you make ANY major decisions in life, you should always ask for opinions at the clubhouse first.

Tabbyking

Sunday, July 13, 2003 - 11:30 pm EditMoveDeleteIP
here, here!!

Weinermr

Monday, July 14, 2003 - 03:34 am EditMoveDeleteIP
That's great Pamy, I'm glad it's working out.

Bobbie_552001

Monday, July 14, 2003 - 03:47 am EditMoveDeleteIP
Way to go Pamy!! Congrats...

Superstar

Monday, July 14, 2003 - 08:27 am EditMoveDeleteIP
Pamy i am soooo glad you asked before you went through with that. i am in the business and believe me, even though i am in tn not ca, those closing fees are CRAZY!!! also, whenever you pay points you might as well not refi. it is not worth it in the end. you always end up paying more interest on the fee which is rolled into the loan. take difference in payment then add up what you are paying to get the rate and see how long it will take to break even. best to get the rate you qualify for and not pay discount points. also conventional is a good way to go. although you may have PMI (which is a waste) if you make extra payments towards loan you can get the PMI dropped after about a year. Just shop around!! good luck

Whit4you

Monday, July 14, 2003 - 04:45 pm EditMoveDeleteIP
Well - I haven't read all the other posts but I'd like to give you my 2 cents (I used to be very involved in this)

Alot of it depends on how long you've been paying on a loan. The longer you've been paying on the loan the more of the interest you've paid off. So for example the first year you might have 24 dollars going to the principal, the next 180, the next 340 and so on and so forth. When you refinance - you start over with 24 dollars going to the principal again... so all the years of interst you paid are now back to square one.

So there's a HUGE huge difference between refinancing 3 years into a loan then thare is refinancing 9 years into a loan.

What you really need to do is determine how long you'll be owning the house, if it's more than 5 years then do not get a non-assumable loan. An assumable 5% interst rate loan will be a big resell asset. But if it's non-assumable then the only thing you have to factor in is how much YOU will be left owning at the end of X years - and add in the amount you've saved in monthly payments during the prior years.


So - let's say it's a non-assumable loan. In those cases you need ask the bidders - HOW much will be left owning on this loan 5 years from the date the loan is started, based on all payments being made in required amount (and on time) Because that's going to tell you which is the best deal you are being offered.

An assumable loan with MORE being owed at the end of those 5 years IS a much better deal - and that is because that person will be getting the benefits of all those years YOU paid only the interest with bare bones amount hitting the principal. (make sense?)

So if after all is said and done your best bid on a non-assumable loan is say "48,000 left on loan at the end of 5 years" and the best bid on an assumable loan is 49,200 at the end of 5 years. The 49,200 is the better deal. That sounds like 1,200 more for the assumable loan... but it's an assumable loan meaning the 18,000 (or whatever) you've paid in interest over those 5 years is water under the bridge for the folks who take over your loan. It's all really complicated and these are just rough #s... just enough to give you an idea of how much better an assumable mortgage is.

When I bought my first house (this duplex) I took over an assumable mortgage. She'd paid 9 years of the interest for me so rather than only 24 bucks going to the principal the first year, over 1,000 did. Much better deal!!! :)

Course alot of this is also dependent on if YOUR orignal loan was a new one or if you assumed one. If you did assume one and not get a new one then your benefits of getting new refinancing is different (because of what I explained above)

What you really need to do is find out the 'bottom line' though - they can use all the mumbo jumbo they want but ask for bottom lines "What will be left owning on this loan in 5 yrs, how much will this loan cost me for the life of the loan"

IF putting 3,000 in your pocket NOW - and it costing you 9,000 20 years from now (more years on the loan...) it may or may not be worth it. The thing IS - you pay interest on that additional money for the next 20 years. So it's just like getting a 3,000 loan for 20 years. Unless you really NEED the money for something - if it were me I'd take the 'cash back' you seem to be getting and put down as the first payment. (or put it into a 5 year CD (emergency fund...gaining back a bit of the interest it's costing you)

When all is said and done - even if it cost you more *eventually* (when 5,000 is worth what 2,500 was now anyhow...) a 5% interest rate will make your home much more marketable if/when you go to sell it.

Whit4you

Monday, July 14, 2003 - 04:50 pm EditMoveDeleteIP
Oh - and one final thing - do NOT get a home loan through "The Money Store" (Now called HomeEq I believe. I wouldn't do business with them again if they offered 1% interest with a 500,000 payback bonus on a 100,000 loan and offered me a free trip on the space shuttle. I'd rather walk on a bed of nails covered with broken glass - blazing on fire - nakid in front of 1,000's ... then even CONCIDER doing business with that company again.

Pamy

Monday, July 14, 2003 - 07:35 pm EditMoveDeleteIP
Thanks Bobbie and Superstar, and welcome!!! Isn't this a great place?!!
Tabby, Juju, Weiner..Thanks for the feedback!
Whit..we are less than 3 yrs into the loan. Great tips! and thanks for the Money store warning!!!!!
You all are the best!!!!!!

Tabbyking

Wednesday, July 16, 2003 - 06:32 pm EditMoveDeleteIP
pamy, i hope you are jumping on something fairly quick...or locking in at a good rate. in the last 3 days, the rate through the company we have has gone from 5.375 to 6.0 for 30-year fixed!! so things are starting to move back up.