Is there a scenario in which I should re-finance the mortgage?

[TNDemo]

In 2004 we took out a 15 year mortgage at 5.25%. Good rate - still making the payments okay (as long as the jobs hold out). If by some chance rates do continue to go down, would it be worth it to re-finance? I have always heard you need at least one percentage point and plan to stay in your house a few years to recoup the closing costs. I am thinking that since we are almost five years into the loan, it probably would not be worth redoing since I don't want to extend the loan. Thoughts?

[slackmaster]

1. It would depend on the closing costs

You have a very good deal right now.

[Phoebe Loosinhouse]

2. Keep the loan and pay a little extra on principle and you will effectively cut the rate

without refinancing. even a samll amount makes a big difference. Take the amount of closing costs you won't be paying and apply it to principle.

[azmouse]

3. I'm no expert but I'd say sit tight.

Why reset the mortgage to another 15 year term and have to pay out the closing costs? Save the money for emergencies.

[Winterblues]

4. My Partner just refinanced his home @ 4.39% over fifteen years

He said it lowered his monthly payments and cut his time in half. He was glad he did it but I don't know what his original interest was though.

[MineralMan]

5. If you're making payments OK, I don't see a reason

to change that one. You're a third of the way through the loan.

If you can do it, some extra paid on the principle each month will cut the effective interest rate far more than any savings you might get on a refinance.

[customerserviceguy]

10. Be sure to check the terms, though

some loans limit pre-payment. Often, they are loans with "teaser" rates that apply a one to three point penalty for early repayment in the first few years. Others specify just how much you can prepay in a given year.

Grab your mortgage papers, and a magnifying glass!

[flvegan]

6. I wouldn't. You've completed roughly 1/3 of the term.

You're actually paying more than just interest. I'd pay a little more each month to bring the principal down. That will affect how much interest you pay overall more than anything.

[NNN0LHI]

7. Here is the way you have to look at it

Since you took out that loan in 2004 most of your payment has been interest. Probably more than 90% of what you have paid over the past 4 years or so was pure interest. It will stay that way for several more years but then you will be paying down on the principle. If you refinance now you will begin all over again that process of paying mostly interest for many years before you start whittling away at the principle of the new loan. Many years. And all that interest you have been paying all these past years is gone. It goes somewhere. I am not sure where? But it is gone. Its like throwing dollars into the wind.

I wouldn't want to restart that process again if I didn't have to.

I am not sure if they still do it but I once got a loan modification on my existing mortgage. It cost me about 15 hundred bucks or so to do it but it immediately lowered my interest rate 1% and dropped my monthly payment by about a hundred bucks so it didn't take long to recoup my investment. And I didn't have to restart that ugly process of paying mostly interest again. The number of payments stayed the same. I liked that.

Good luck.

Don

[slackmaster]

12. 15-year loans are on a different amortization schedule than 30-year loans

After one year you have paid only a little more interest than principal.

Here is a nifty amortization calculator:

http://www.1728.com/mortpmts.htm

[NNN0LHI]

15. Whatever it is its like throwing money into the wind isn't it?

Because you have to begin the process a all over again from square one.

Don

[slackmaster]

21. Unless you can get a much lower rate, or get a loan with a 10-year term

I have just over nine years left on a 15-year fixed at 4.75%. There's no way I'm going to refinance, unless rates go down into the mid-3s.

[Demobrat]

8. Figure out your "break-even".

The point where the savings pay off the fees involved. They're all over the internet. Here's one:
http://www.mortgagor.com/mortgage+refinance+breakeven+calculator.aspx
That should tell you if it's worth it to you or not.

[Blue Diadem]

9. You only have 10 yrs left.

I'm not sure I would extend the life of the loan with an additional 5 yrs to save 1% in interest, unless you need to lower your payment. In the long run, I think you'd end up paying a considerable higher amount in total interest even if you lowered your payment just because you'd be paying interest for an additonal 5 yrs. Not unless the bank would finance you for 10. We once asked for a 20 yr. mortgage and the bank financed us for that term.

I'd suggest using a mortgage calculator and look at the amortization schedule. It should show accumulated interest paid per year and over the life of the loan.

[TNDemo]

13. I was thinking maybe a 10 year loan

because I don't want to extend the time of the loan, if I did it at all. I am pretty convinced to stick with what I have but wondered if there was any way to improve it, but I doubt it. I also have considered the fact that we could lose our jobs in this economy and if we would need to re-finance it should be while we still have jobs, but I think I am just going to stick it out and hope for the best.

[Blue Diadem]

16. My son is refinancing.

Rates increased a bit while he was waiting for his appraisal, before he could lock in the rate. He's saving about 1 1/4% and is doing it not only for the savings but to have that lower payment in case either he or his wife lose their jobs. They're not as far into their mortgage as you are. They bought 2 yrs ago on a 30 yr mortgage.

Just a thought to toss out here, if there is a chance you could lose your job, maybe refinance for the longer term but keep making your payment amounts that you have been making. That way the lower payment is an option with the longer term if you need to use it.

[Lex]

24. Nothing keeping you from paying more toward principal each month

and you can turn it into a 10 year mortgage yourself that way.

[tjwash]

11. Shit no...stand pat.

5.25 is an awesome rate, and you only have 10 years before you own it.

Every place want points, which is a total rip off, add in the closing costs (another rip-off), and even if you drop a full percent, you're not going to really going to save enough to make it worth doing.

[merh]

14. the closing costs would negate any savings

unless of course, the financial institute agrees to pay all closing costs (doubt that will ever happen).

[Tesha]

17. It happened for us!

During the last big re-fi binge, we had a loan from Wells-Fargo
at rate X. Eventually, when prevailing rates got to X-2 or so,
we were ready to jump ship and leave Wells-Fargo. But just
about at that moment, we got a package from Wells-Fargo
offering us a new loan at X-2.5 (!) % with *NO* closing costs!

We're still W-F customers ;) . (Yes, we picked the "ten year,
No cash out" option.)

Tesha

[merh]

19. damn, then you guys got a great deal

belated congrats on that

[Tesha]

23. Yes, we thought so then and still think so now.

Although if we could have forecast the rates on some
of the kid's student loans, we might have taken some
cash *SOLELY* to pay those off.

Tesha

[merh]

25. a niece joined

the navy to get the bonus to pay off the student loans. I tried to talk her out of it, but had no luck.

another took a job working 6 days a week - 10 hour days processing Ike claims in another state, away from her husband and son.

The first niece did get her nursing degree, the 2nd niece got a basic BS degree and wants to go to graduate school.

[helderheid]

18. The rule (as far as I know) is that more than a point drop is worth financing.

[dysfunctional press]

20. wait and see what happens in congress...

in another month or so, you might be able to re-fi at 4% with no closing costs...:shrug:

[Lex]

22. No. If you look at an amortization graph, you'll see you are knocking down principal

right now at a accelerating pace. If you refinance, you start all over again and you'll be paying mostly interest again.

Most all mortgages start with the borrower paying mostly interest only as payment, and then over time incrementally more principal. Don't put yourself at the starting line again on that.