Refinancing DISadvantages????

**ilovechocolate** · 07-27-2010, 09:38 AM

I am considering refinancing my home from 6.5% to 4.375%.
And most closing costs, etc., would be rolled into the monthly payment.

My question is---are there any DISadvantages to refinancing a home?

**Russ** · 07-27-2010, 09:43 AM

how far are you into your existing mortgage?

**Russ** · 07-27-2010, 09:46 AM

oh, and DON'T do like a friend of mine did... He added $5000 to his mortgage so he could pay off his truck. He was very proud of the fact his truck was paid for until I told him, "No, you'll be paying for it for the next 30 years.

**ilovechocolate** · 07-27-2010, 09:50 AM

Russ---I'm 3.5 years into it. It's a 30 year.

**Greebo** · 07-27-2010, 09:54 AM

Originally Posted by ilovechocolate

I am considering refinancing my home from 6.5% to 4.375%.
And most closing costs, etc., would be rolled into the monthly payment.

My question is---are there any DISadvantages to refinancing a home?

One - you'll be back up to 30 years, unless you refi to a 15.

But if you keep your payment at the same amount as it was at 6.5%, even on a 30, you'll have that much more going to principal, which means you'll save tons more on interest over the long haul.

**Russ** · 07-27-2010, 09:55 AM

on a $100,000 30 year mortgage @6.5% you will pay a total of $227,544.xx

on a $100,000 30 year mortgage @4.375% you will pay a total of $179,742.xx

So far you have paid down your mortgage about $3500 assuming a $100,000 mortgage.

You will be WELL ahead of the game if you refinance.

Those are rough numbers.

**ilovechocolate** · 07-27-2010, 10:15 AM

Thanks, Greebo and Russ, for the input!

**stinkbug** · 07-27-2010, 10:48 AM

We just did this. We refinanced from 6.38 to 4.38. Our closing costs were only about 3,000, which we paid up front (not rolled in) We went to a 15 year and our payment only changed 4.00!!! I actually pay extra towards principle still (like I was before) and it will pay off in about 8.5 years at my current payment schedule. We were about 7.5 years into a 30 year.

**mek42** · 07-27-2010, 01:53 PM

Even for a brand new mortgage, 30 year vs. 15 year is usually only 10 - 20% difference in monthly payment due to lower interest rate on 15 year mortgage and amortization differences. Have you looked into refi'ing to a 15 year? You might get closer to 4.00% if that 4.38% was for a 30 year.

**scottp999** · 08-17-2010, 04:03 PM

I look at a little differently in times when jobs seem really insecure. Refi to get the payment down, and then send in your extra principal to payoff early.

Refi'ing back out to a 30 at a lower rate (wouldn't do for less than a 100 basis point/1% drop) is just lowerning your monthly minimum payment.

If work stays steady just send in extra principal. If you run into hard times the monthly minimum will be easier to pay.

Closing costs are an important consideration.

I just refi'd my 30 year (23 years left) back out to a 30 and dropped it to a 4.5% rate. I still plan to pay it off in the next 5 years, but in case the worst happens (we both lose our jobs), my fiancee and I could pay our mortgage, prop taxes, utilities, and eat on minimum wage jobs. That way we don't burn through our emergency funds as fast.

It takes a ton of dicipline to send in that extra principal every month and not spend it on something fun. If you are rock solid on writing that extra principal check each month, nothing wrong with going to a new 30 year.

By all means, if you refi, and you get that month without a payment, send the whole thing in as a principal only payment to get a jump start on paying it off early.

Today's rates where I did mine where 4.5% on a 30yr and 3.875% on a 15 (0 points and no appraisal fee since I was staying with the same lender). These are the best rates in history.

**Natalia** · 08-22-2010, 01:21 AM

Actually, you don't need to have discipline to pay extra (thank goodness) at least in Canada you don't.
Here's what I did and what I recommend to others;
1. I had a 25 yr fixed @ 8.25%
refinanced to 25yr fixed @ 4.15%
2. Calculate using onlne mortgage calculator what your "new" payment would be if you were to take out a 15 yr and 10 yr (and everything in between if you like)
3. Figure out a comfortable level to spend monthly, say $1000
which by using the online calculators will tell you the "new" amortization (say 10yrs vs 25)
4. Get your banker to auto deduct the $1000 (or whatever) monthly. They will do this for no fee and you can call in as often as you want to put the amount back down as needed
5. Keep your mortgage officially as a 25yr while paying the equivalent of a 10-yr not only saves $$$$$$ in interest but you have that security net if times get really tough, you always have the option to drop it down, no questions asked. The other way you can get into a pickle, because you're committed to the higher payment.

I remember my ex bf's parents accelerated their mortgage the wrong way, they were doubling up their mortgage payments and they made it "official" . Within 2 months the dad was laid off, and the mom put her back out and was unable to work indefinitely. They were in their 50's and all of a sudden up the creek without a paddle.

**jacqueline** · 08-22-2010, 02:53 PM

Make sure to find out all of the costs associated with it. I live in WV and had to have my house termited ($600 --reduced rate from a friend-- these are usually more expensive) and the appraisal cost was $400. I'm glad I did it though - it will save me money in the long run.