Refinancing is a hot topic right now based on the record low mortgages rates.
There are so many different refinance strategies that I wanted to highlight some of them for those of you considering a refinance right now.
Reader Refinance Tips
Check out different banks. Check out Wells fargo. Not their site but rather call a loan specialist. We got an offer of 3.375% with them giving us back a point (not paying but receiving a point back essentially buy up points) on a 15 year conforming fixed loan. So you may want to keep looking or checking out different places including who currently holds your loan. This will be our 3rd refinance. Essentially this will be our 4th loan in 6 years… we are averaging refinancing every 2 year… but they can’t go lower… (which I have said about 2 times before) but we got an even better rate then that but we went with an arm product. I only have the rates for getting points back because I wanted to make it 0 cost. – Carlos
Get a 15 year loan. We re-financed last year to a 3.375% 15-year loan with around a point. I think now you could have that for no points or pretty close to it. No big deal for us though as it still will save us $70,000 or more over the life of the loan. We didn’t have a specific number for a target but I can tell you that we came in better than what it we ever could have hoped for! – Money Beagle
Get a 30 year loan. With mortgage rates as low as they are and mortgage interest being tax deductible, one should consider locking that low rate in for as long as possible (30 yr vs 15 yr). A typical balanced portfolio will yield 5 – 8% pre-tax, so if you can borrow for 4%, that is likely a net after tax rate of 3%, and if you can earn 5%, that is likely an after tax 3.75%, aren’t you better off making the lower mortgage payment and investing the rest in your balanced portfolio? Certainly if you currently weren’t taking full advantage of a 401K, moving that piece of monthly income there, that would be a no-brainer. – Steve
Get a no cost loan. I’m finalizing a no-cost re-fi for 30 yrs at 4%. I could’ve gone lower, but I just didn’t want to pay anything. I’m stubborn like that and trying to re-build my emergency fund after last year’s emergencies. – sunkcostsareirrelevant
Pay off the mortgage. My wife and I paid off our mortgage about 10 months ago and haven’t once thought that we made a bad decision. Opportunity cost is hypothetical. Free cash flow each month is a sure thing. Try to beat a mortgage interest rate of 0.00%. – Executioner
Refi now and be done with it. Do you have any lenders in your area that do no-cost refi’s? We had James B Nutter in our area and I no-cost refi with them a couple times while paying off our mortgage. I’d look into that and see what kind of rate you could get to go no-cost on it and get into a fixed loan – if you don’t want to tie up capital on 15 year, just go with 30 year and pay extra each month you want to or can. – same thing, just don’t get the lower rate. Rates may go a little lower, but more likely to go higher from here. I’d refi now and be done with it. If you have a no-cost refi in your area, you could always refi again for no cost. – Joe
I think rates will stay about the same. The fed said they are planning to keep rates low until the end of 2014, which is a very long time I think. I feel sorry for the older people that are on a fixed income. CD rates are just so low, they have to be struggling I would think. – Curt
Move from a jumbo to a conforming loan. I have been in the process of implementing your refinancing ideas for the last several months. Here are my actions: Pay down my jumbo mortgage by $106,000 to $417,000 to qualify as a conforming mortgage. I had little cash but accomplished this by: (1) applying for several credits cards which I was able to take cash advances totaling about $45,000. These were at 0% intro rates for about 1 to 2 years. Some cards charged a 3% fee, though; (2) borrow $24,500 against my Thrift plan a work. Rate is 3.25% for five years; (2) early withdraw about $36,500 from my 401(k). Paid a 10% Fed penalty and 3% State penalty. Also, will pay additional income taxes on the funds.
My old rate was 6.125% I.O. and monthly payments were about $3,300. I was paying more than minimum to reduce principal somewhat. My refi rate is 3.875% with a APR of 3.90% with Provident Funding. The kicker is this included a 0.875 pt CREDIT. Which in my case equated to about $3,600. The result of all this is my savings is about $1,400 PER MONTH. Plus I am reducing my principal by even more than I was before. For the next few years I will be paying down my credits cards and Thrift loan. Then it will be pure savings going forward. – Karol
More Refinance Thoughts
Thanks for sharing all of your thoughts about refinancing! I’m still sitting on the fence with our 5/5 3.375% Penfed jumbo loan, but my new hobby is watching the mortgages rates. Daily.