Should we refinance?

**my4littlebuffaloes** · 12-23-2008, 12:52 PM

We are in a 30 year mortgage, having paid just 2 years on it. Our rate is at 6.25%. I am trying to decide if we should refi or not. We could get a rate of around 5% or maybe less. There are 2 options. The first would be a 30 year fixed and would lower our payment by $250 a month. We would try to pay it all extra onto the principal if we did this option, but having an extra $250 a month to cover an emergency if it came up would be a nice option.

Second option is to refi to a 20 year fixed. We would cut 8 years off our mortgage but would be locked into a $1200 mortgage payment, which is what we are paying now, so no problem there, but it doesn't free up any cash each month, ya know?

My problem is the fees involved. How do you handle them? We are talking about $4000 or so and we don't have the cash to cover them. Is it a good idea to roll them into the loan (normally it isn't, I know, but with the drop in interest rates, it still seems like it would be a good deal) or will they even do this anymore? I am just not sure what to do.

**Greebo** · 12-23-2008, 01:07 PM

You should shop around some. $4,000 for closing costs on a refi sounds high to me.

Saving $250/month means you recoup the closing costs of $4k in 16 months. That's not as good as it could be but it's not terrible.

As for the monthly cashflow - do you *need* $250 more a month? The lower term will get you a lower rate which will save you more interest long term than the 30 year w/ a higher rate and *occasional* extra payments of $250 (because be honest, if you have $250/mo more in cash, you're gonna find other ways to spend it other than on the mortgage...)

**Debbie-cat** · 12-23-2008, 01:12 PM

I just watched a program on the t.v. the other day about this.

Just my opinion but what I would do (if you chose not to shop around like Greebo mentioned) is to take option #1.....BUT with the extra $250 you have per month I would put it down on your principal. It would drop your mortgage by quite a few years and if you are paying the $250 now, you won't miss it. If something really pressing comes up where you need the extra cash one month, then use it.....but really try not to. Over the course of a year you would be putting down $3000 down on the principal and that will really help to drop the number of years!

**ri*smom** · 12-23-2008, 01:38 PM

Too funny. Dh is on the phone this very moment speaking to our credit union. Right now, we have a 30 year @ 6.5%. I'd like to go to a 15 year @ 5%, assuming we appraise high enough to be rid our our PMI. *fingers crossed*

**Russ** · 12-23-2008, 03:31 PM

I will be perfectly honest here... we have less than 10 years left of a 15 year mortgage and it has not been a struggle with a higher payment, BUT, I'm afraid it could be soon.
If I get laid off, I will be wishing we did NOT have that higher payment.

**my4littlebuffaloes** · 12-23-2008, 04:27 PM

Greebo, thanks for the honesty. We already pay extra each month, so I am sure that almost every month we would continue to pay extra. But if something came up like a major car repair, or heaven forbid a job loss, the lower payment would be much better.

rcannon - I am not worried about making the higher payment, as we have already been making that payment. I just think I would be more secure if we had a lower payment, because honestly some months (winter heating bills come to mind) money is really tight!

Thanks everyone, I think I will look around some more and try to find lower closing costs and go from there.

**rowdy35** · 12-24-2008, 06:54 PM

i'm going to refi my first & second now to a 30 yr. fixed at 5.5%. I am stoked !! The closing costs will be $2500 and they will roll them into the loan. I'm cool with that b.c. my pmts are going to go down over $600 per month. I'm just so excited that when it's all said and done I will be doing a happy dance !!! Right now my first is at 7.25 and my second is at 12.88 so now is the time to do the refi !