SJ. Posted June 20, 2014 Share Posted June 20, 2014 DH and I would like to refinance our home but are having a difficult time choosing which option to go with. The people I speak to seem so pushy and just throw out numbers leaving me feeling :confused1: :cursing: :confused1: Hopefully some of you can help me out :) Here are my options: Option 1: Stay with the bank that holds our mortgage thus lowering closing costs, does not need an appraisal (saving me a ton of work getting my house decluttered and cleaned up!). Interest Rate: 3.875% Closing: $4689 Saves $335/month compared to what we are currently paying Option 2: Stays with same bank as described above Interest Rate: 4.25% Closing: $0 Saves $311/month compared to what we are currently paying Option 3: Go with another bank thus needing to do an appraisal, pest inspection, and new escrow account. Interest rate: 3.75% Closing: $4470 Saves: $328.51/month compared to what we are currently paying **It looks like the monthly savings is off, the above numbers were given by the mortgage brokers. I believe option 3 will save us around $20 a month more than option 1)** The person at the first bank is really pushing the 4.25% interest rate. He says it will take us eight years to recoup the closing costs. My husband and I are looking at the money saved each month to determine how long it will take to recoup the costs which will take one year. I am not sure how the banks determine this, anyone care to explain in layman's terms? Does a mortgage broker have an incentive to sell a higher interest rate? We aren't sure how long we will stay in our home. Sometimes we want to move but we've been saying that for the past three years. If we do move we may explore renting our home. Thanks for any tips and opinions! SJ ETA: Our current interest rate is 5%. Quote Link to comment Share on other sites More sharing options...
MeghanL Posted June 20, 2014 Share Posted June 20, 2014 What is your current interest rate, as that will also determine if you should refinance. Quote Link to comment Share on other sites More sharing options...
SJ. Posted June 20, 2014 Author Share Posted June 20, 2014 It is 5%, 30 yr fixed. We are looking at another 30 yr fixed. Quote Link to comment Share on other sites More sharing options...
Arcadia Posted June 20, 2014 Share Posted June 20, 2014 Option 1: Stay with the bank that holds our mortgage thus lowering closing costs, does not need an appraisal (saving me a ton of work getting my house decluttered and cleaned up!). Interest Rate: 3.875% Closing: $4689 Saves $335/month compared to what we are currently paying Option 2: Stays with same bank as described above Interest Rate: 4.25% Closing: $0 Saves $311/month compared to what we are currently paying The person at the first bank is really pushing the 4.25% interest rate. He says it will take us eight years to recoup the closing costs. Between option 1 and 2, you save $24 more with option 1. However you pay for closing. That is about 195 months worth of savings of $24. Of course the principal amount goes down with every monthly payment so it wouldn't take as long as 16 years to make up the closing cost savings. If you put the closing cost savings from Option 2 into paying down the principal, you would be saving more than $311/month. Are you likely to do any extra payments over time to bring down the principal further? Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 1, 2014 Share Posted July 1, 2014 All depends. How many years do you have left on your mortgage currently? How many more years will you be adding to the pay off date? Have you amortized the entire thing to figure it out? You may be "saving" $300 or so per month, but what do you save on the bottom line? At the end of the new 30 year mortgage, what will you have paid for your house with all interest included with your current loan vs. the new loan? BankRate.com has calculators to help figure it out. Quote Link to comment Share on other sites More sharing options...
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