Will be moving in 6 months - how do I refinance (mortgage up in October)?

Question

As stated above, I will be moving, but I need to refinance my mortgage ASAP (5 year fixed up in October). What is my best option so I do not have to pay any penalties/fees when I go to sell? Thanks for your help! If you need more info, please post for me to read and I'll respond. I live in Illinois.

Yes, I have a five year fixed at 5.25. Any idea how much it will go up if I do not refinance and then sell in February? Thank you mj69catz and dzwreck for your very informative feedback.

Answer 1

Chances are refinancing will not be cost effective, if you are moving in 6 months and your adjustable rate is up in October, which is 3 months away. As previously mentioned most lenders will charge some form of closing costs, appraisal fee, new escrow accounts, title charges, etc... Even if you see a lender advertising a no cost refinance (such as the ad Countrywide advertises all over the television), you will end up with a much higher interest rate than normal to offset the closing costs. If you obtained a 5 year ARM 5 years ago, chances are your rate is considerably better than the rates are right now and you will be better off just letting your rate adjust for the few months until you move. You most likely have a 2% cap on your 1st adjustment and the rates now that you would qualify for are probably at least that much higher.
However, if you have a 5 year balloon, which is unlikely, then you will either have to refinance, unless you can pay your loan off in full or you will have to sell your home a few months early. You could also try calling your lender to see if they can give you an extra couple of months to sell your home after your balloon is up, if you are on a balloon.
Best of luck, but I think you are better off where you are at and you will take a step in the wrong direction by refinancing.

Answer 2

If you are refinancing now and will be moving shortly, be very careful with any new mortgage. While it may seem less expensive to get a new solid interest rate, many lenders are now putting in prepayment penalties if you 'terminate' the mortgage in a shorter time.

Lenders were burned in the past by folks who would take a mortgage and then quickly refinance, leaving the lender with all the costs of originating the mortgage and very little profit at the end. Hence, the prepayment penalties.

You might want to check with a local lending source for short term financing on your property until you sell it.

Answer 3

You don't state why you need to refinance -- and that is really important here.

If you need to refinance because the interest rate is going from fixed to variable -- I would say not to worry too much. You are only talking about 3-4 months.

Most mortgages are going to require some sort of funding -- points, charges, additional interest, etc. And chances are you will not get much better of a rate. The general rule is not to refinance if your interest rate is not low enough to cover the cost of the refi in less than a year.