4.5 interest rates? refinance?

**itlw8** · 12-04-2008, 11:23 AM

If the rates really do drop to 4.5 how do I know if it really is good to refinance ?

we are at 6.125 21 yrs left on a 30 yr fixed (52000) plus a heloc of 7000 at 5 something we do have good credit so we should quailfy for the low rate if it happens.

The original plan was to refinance after the addition was done and we never did it. thinking paying off the heloc in 10 years was better than 30.

refinance or keep paying extra principal.

how many points should it drop to make it worth it ?

the heloc is next in line for the snowball starting in March

**Greebo** · 12-04-2008, 12:45 PM

What you will want to do is get a few quotes from brokers - ask for PAR quotes (no points, no origination fees) and find out what the monthly will be and the rate, and how much the closing costs will be.

Then figure out how long it will take you with the new payment savings to recoup the closing costs.

If it takes more than 1-2 years to break even, its probably not a good deal.

**57plymouth** · 12-04-2008, 04:56 PM

It is my understanding that the 4.5% rate is only available to new construction purchases. The Gooberment is not allowing the low rate for refinancing.

Otherwise, the traditional wisdom is to refinance if you can get a rate that is 0.5% lower than your current rate.

**Greebo** · 12-04-2008, 08:06 PM

Originally Posted by 57plymouth

It is my understanding that the 4.5% rate is only available to new construction purchases. The Gooberment is not allowing the low rate for refinancing.

Otherwise, the traditional wisdom is to refinance if you can get a rate that is 0.5% lower than your current rate.

The tradition I always heard was 2.0% or more... interesting...

**Denvergirlie** · 12-05-2008, 08:24 AM

From what I read yesterday it sounded like this proposal would only be for "new" home purchases. It was proposed to help stimulate housing sales and would not be available to those that already own a home unless they sell and buy a "new" house.

http://www.marketwatch.com/news/stor...7D&dist=msr_27

Snips from above linked article:

It's unclear whether the proposal would create refinancing opportunities, which analysts said would be even more positive for the beleagured housing industry and battered home buyers.

"They hope making funds available to offer lower-cost mortgage financing will have a stimulating effect on the mortgage market by getting people to buy homes,"

Of course this is just a proposal at this time and of course it's unknown if it would even come into fruitian at all.

**Neil** · 12-17-2008, 05:09 PM

Originally Posted by Greebo

The tradition I always heard was 2.0% or more... interesting...

I am a Lender and always recommend that if you can make back the cost of your refinance in 12-18 months and are not planning on moving then it is a good deal. Also I was a finance major and just enjoy saving $, and saving $ for people.

It basically depends on the cost of refinancing vs how much you will save monthly. For some people with higher loan amounts to refi, they will be able to refinance and save $ at only .5% difference in the rate. Other people with lower loans, say around 100,000, would take much longer to re-coup the costs of their refinance.

True, many say to refinance and get no points origination fee etc...but let me just let you know that if there is no origination fee then most likely the lender will be making their (origination fee) in a higher (to you) rate. Trust me, money must be made somehow for lenders; it is a commission business.

If you are not going to live in a house very long (2-3 years), but want to refi & save some monthly $ and have no orgination fee, broker fee etc etc, then its a good idea go the higher rate way...if you can still save $ monthly..

But..if you're going to live in the house a while then you may save much more $ in the long run by paying an orgination fee. You just have to run the numbers and see which is best for your situation.

In summary. Figure out the total cost to refinance, then divide your monthly savings by that cost; if it only takes about 12-24 months to re-coup your costs, then after that you're actually saving $ monthly and its worth it.

**Greebo** · 12-18-2008, 08:49 AM

Hey Neil,

You aren't licensed in MD by any chance, are you? Know anyone in MD or nationally who's at all willing to even consider any kind of under water properties? It's only by a few thousand, and I'm just looking to take advantage of a better rate than 6.25 if I can, and if it would be worth it.

So far, nobody's interested.

**knitnmom** · 12-30-2008, 01:04 PM

We can't refi to save our lives! We have negative equity and regardless of the fact that we have stable income and can afford our mortgage payment, there is no one willing to refi unless we have at least 3% equity. We are stuck at 6.5% and it's driving us nuts!!