Got a call from Wells Fargo, my current lender, offering a refi deal. Current rate is 4.75%. I haven't refinanced before because the house has been on the market and with closing cost of 5k plus for most refi's it's not worth it. House didn't sell and we will probably keep for another 2-3 years before trying again. Have 25 years left on note. Wells fargo called today and said they could refi for 3.625, saving $138 per month at 25 years. They claim no closing cost ect... only fees would be third party fees of $2200 because it is a VA refi. Doesn't really seems worth it to me. Not saving enough per month and it will take 20 months to "earn" back the 3rd party fees. Wondering why they would offer this "deal" when it doesn't really benefit either party. Guessing they are making some of the "3rd" party fees. Initial offer was to do a new 30 year note so I am guessing they would make a small amount on interest over the new 5 years, even at 1% less. To lazy to do the math right now.
This, they will probably sell the loan off in the end. May not have as of yet, but when the refi is done, your actual lender won't be WF, some other bank would buy the loan. And no, it's not worth it to you obviously. Unless you plan to stay there until you pay it back, not worth it which I know you get.
Any way you can re-fi with out the VA. You might have enough equity and or your financial situation improved which would allow you to qualify with out the VA requirement. The fee is not going to a third party or is it any form of "kickback" The fee is going to the VA which allows it to operate and provide it's mortgage program. Which is mainly no/little down payment required and no PMI etc. You already paid a VA fee when you originally got the mortgage. If you have enough equity in your house or if you can make an additional down payment you my qualify with out needing the VA and avoid their fee. etc.
VA fee on refi can be a little up there, unless you are disabled military then it is $0. 20 month recoup isn't bad, but the refi has to make sense to you. It's not always about the rate to save money. Sounds like a decent one if you want to save a couple bucks a month as you're not going back to a 30 year note and re-setting your mortgage. If you're planning on staying for 2-3 years consider the "savings" of that period and what you want/can do with that money. You could easily set that aside to pay for some racing or for part of your next down payment/moving costs.
I can't see the benefit in that scenario- only 1% lower rate, same term length, and $2200 in fees??? I'd shop around and see what's available in a 15 year loan. Paying off earlier and a much lower total cost are way more incentive to me than saving $138 a month.
I just got a loan for a car from Lightstream (part of Suntrust bank I think) at 1.99% for 5 years. This got me seriously thinking- wonder how much they'd give me- enough to pay off my mortgage? There were ZERO fees and the loan is unsecured, which means title in my name, I was free to buy whatever/whenever. Applied online and had cash in my bank acct. within a week. Found a car below my initial budget, so I was able to pick up a KLR and still have a few grand left for a new racebike. Sometimes it's good to be old....good credit is a big advantage these days.
FWIW: WF made me a similar offer late '11, it was probably the 3rd time they've done so, so it seems to be normal practice for them. As for their advantages, I don't know how much equity and/or yrs you shaved off your original loan but accepting their deal will bump you back up to 25 yrs. I suppose even at the reduced rate they're still making $$$? At the time, I was at 5.375%, they offered 4%, I called them asking if they could sweeten the deal cuz I had local banks offering lower rates and they did so....I didn't even hesitate, I got them down to 3.375%, no fees. But again, I was down to like 10 or 11 yrs and this refi got me back to 15 yrs. If I were you, I'd give them a call and see what they could offer you for a 15yr term, the rate might be so good as to put you in a nearly similar monthly range as you're sitting at know or better even and ya just shaved off 10 yrs on your note. Food for thought.
I will either keep it at 25 years for a savings of $138/month or go to 20 for same payments as now, taking 5 years off the note. I will ask about 15 year. Might be worth it to cut 10 years of for only a hundred or so more. I tried to sell the house and no luck so I am guessing not much for equity. Don't want to add any to what I owe because I am going to try and sell again in a few years. I think I want to stay with VA, most of there loans are VA assumable and if rates get weird in a couple of years that might be attractive.
This. Go for shortest you can. I had 30 year originally and with 25 to go I refinanced with 15 year term, same lender. Monthly payment was less but I kept paying old amount with extra going to principal. That shaved another 3 years out of the loan.
I went from 25 years left on a 30 at 6 1/8 to 15 years on a 15 at 2 3/4 I had to pay 2 points to get that rate, but my interest paid now is under 2500 for the year. Mortgage payment went up 25/month and I lost 10 years of payments. Spent right around 3k of my own money to do the paperwork/title/origination/all that banker shit. I was trying to get a 10 year loan but it would have tapped out my bank account to keep the monthly payment around the same. This was in late 2012 so I got that rate right at the perfect time. Did a HARP program thing. I'll be 47 with a paid off house. Actually sooner, I pay an extra 1-200 most months.
Not great advise and this depends highly on your specific case. I personally would always get the 30yr for a slightly higher interest rate (~.5%). Then if you simply make 1 extra payment a year (not full mortgage, but just P&I) it becomes a 22yr payoff term. If you make 2 extra payments....15yr term, but you keep the flexibility. I refi'd in 2013 and got 3.25% for 30, but keep paying my previous payment and bam....2 extra payments/yr and knocked 1/2 the time of my note. Also, through negotiation you can get banks to pay your closing costs. When discussing this, ideally you want them to pay your closing costs & title fees (these are often called 3rd party since nothing goes to the bank). The title fees are the big ones, but you can shop around here as well. Here in Ohio, most of the Title costs are regulated, but the firms still have hidden fees and everyone calls the same fee something different to make comparing apples to apples quick difficult. All in all.....its really a PITA. Oh, and you will probably have to pay another appraisal out of your pocket as well ($3-500). So, it might not be worth it if you are planning to sell anytime soon. Oh....and never pay points unless you intend to never move.
Maybe I'm not understanding you correctly, but how do you go from a 30 year term to a 15 year term and have monthly payments that are less unless you have significantly paid down the original principle.
Why is going for the "shortest you can" bad advice. He qualified it by stating "as you can" meaning if you are able to do so then you should do it. Obviously everyone's situation is different. What seems crazy to me is having a 30 year mortgage at a higher rate and then making extra payments to effectively shorten term. Yes, you are shortening the term, but you still have the higher rate. I get the notion of paying the loan off early. At the same time I would rather do it while also having a lower rate. I would rather re-fi to the lower term and the lower rate. It also depends on what the spread on rates are when driven by the bond market. There was quite a gap between 30 and 15 yr mortgage rates - IIRC almost a full 1.0-1.5 spread in some places about two years ago. So going to a 15 was clearly the better option -again based on if you could do it, but it was a no brainer to go 15. I also wouldn't make the statement to never pay points unless you are never going to move. As you know one can calculate and compare this upfront cost towards the savings gained and determine exactly the break even point. In some cases paying points is the better option even if you decide to move, it just depends when. In any event rates are still ridiculously low, so I say borrow as much as you can for as long as you can. :up:
This is also good advice, but it requires discipline. If ya lack it, you'll be closer to the 30yr end of it.
Matt, Help me with the math... Let's take a $100k loan, 30 yrs, 3.25%. The payment is $435/mo. You're saying that by paying an additional $870/yr, you cut the term in half? I'm getting ~$3200 extra/yr or $267 extra/mo to cut the term in half.
Exactly what I did. I had 20 years to go and they offered me much lower rate. I took it but 15 years instead 30. My payment dropped from $707 to $688, just looked old bills. Than I add 100 or 200 per month and I be done in 13 years instead 15. I refinanced it back in 2003 and I will be paid off sometime next year. So, why refi to 30 years, add per month and cut it to 20 when I can do 15 and done in 13? Or shorter if I want to pay more than 100/200 extra. And it was same lender so I only had to pay ~$300 for paperwork. And unlike many I did not take more money when refi.
