Refinancing costs/Closing Costs??

Question

I have a $252k loan on my $290k house. I am in an interest only loan b/c at the time I purchased my house I owned an additional home in CA and it was the only way I could qualify. I am now trying to refi but the costs seems steep. My cost, including some PMI, Home owners and taxes is going to be $1975 and my new loan will be nearly $260k. Does that seem like a lot more just to refi? Closing costs are $5,500 andd the rest is pre-paids or something like that. I believe my interest rate on this 30 year fixed is 5.875.

Thanks,
Allison

Answer 1

What is your current rate, is it fixed or variable? You may be better off not doing anything at all. The interest only loan, does not really prevent you from paying principal down, just add extra money every month.
In some cases you may be better off paying interest than closing costs. Interest you pay over time and it is tax deductible, closing costs you have to pay right away or add to the mortgage, which is the same thing, it is still your money. Closing costs are not tax deductible. Just take all expenses related to this refinancing and compare to interest savings, and see how long will it take to break even. I have a suspicion it will be more than a couple of years, in that case, don't do it. See if you can find a broker, who will get you a slightly higher fixed rate, and take care of closing costs. Do not try to estimate the interest savings over the next 30 years, as I can guarantee you this loan will not survive that long. Usually you either refinance your loan or sell the property or something like that within 5-7 years. Sometimes sooner.
So, check the math. Plus 5500 closing costs sound steep in all cases.

Answer 2

Brokers make money 2 ways. They can either sell you a higher rate, and get paid by the bank or sell you the "par" (where the bank doenst pay the broker anything) rate and charge you a point or 2 for loan origination. At 5.875 it sounds like the broker is offering you the par rate and charging you fees up front. This is the best option if you truly see yourself in the home for an extended period of time. If you see your plans as more short term - even 5 years - then it may be more beneficial to take a bit of a rate hit and have the bank compensate the brokers rather than you yourself paying them out of your equity.

Give me a ring if you want to discuss timelines and work out the benefit/break-even point of the situation.

Daniel Algieri
Loan Specialist
[phone] x 1491
[e-mail]

Answer 3

"At the time I purchased my house,I owned an additional home in Ca"

What happened with house in Ca? Did You sell it? If so why didn't you put the proceeeds against this debt? If you didn't sell it, why do you keep it?

If the rate is fixed for a whole 30 years, with no chance of going up, I think you will be happy in the future when inflation kicks in. If it is not fixed, You have too much debt to equity in my estimation.

Answer 4

Sure can. Make sure when you refinance that it's equal to the mortgage plus the closing costs.

Answer 5

no clue

when I bought land I just brought a check, no mortgage

no experience with that

I think maybe calculate exactly what the costs are and what the reduced payments will save you

Answer 6

It takes 8 seconds for yahoo answers questions to display for me to be able to click on [add your answer] box. does this mean my laptop is slow?

Answer 7

http://search.yahoo.com/search?search=mortgage+calculators&ei=UTF-8&fr=ks-ans&ico-yahoo-search-value=http%3A%2F%2Frds.yahoo.com%2F_ylt%3DAkpe0OIPrAZ5rV25uq1.9aAazKIX%2FSIG%3D111gjvvgj%2F*-http%3A%2F%2Fsearch.yahoo.com%2Fsearch&ico-wikipedia-search-value=http%3A%2F%2Frds.yahoo.com%2F_ylt%3DAvgg9BOIN3D1SHHPLy3Ve4YazKIX%2FSIG%3D11ia1qo58%2F**http%253a%2F%2Fen.wikipedia.org%2Fwiki%2FSpecial%253aSearch&p=mortgage+calculators

Have all your loan info ready (how much you owe, estimated closing costs, taxes paid, how long you have left on your mortgage) and run the numbers. It's the only way to tell if and when you will get ahead by refinancing.