Would you refinance a 15-year mortgage to save 1% interest?

[Gavin Allan]

Well?



Mortgage rates are down very low again.

Thanks.

 

[Jacob Dryer]

Totally depends.. how much time is left on the current 15 year, how much is owed, how much are closing costs.



When we refinanced it was going to take 3.5 years to recoup our fees but we are talking about a 30 year in my case.



Start crunching numbers there are lots of calculators to show you the gain/loss.

 

[Gavin Allan]

13 years

closing costs ~9500

Saves about $150 month on payment.



Looks like a loser to me.

 

[Jacob Dryer]

 

[TomT]

Unless you can get them to forgo the closing costs than it's not worth it.

 

[Les]

Will take you 63 months to break even. If you have NO plans to move & pay off the mortgage as scheduled you will save $13,950, if my math is correct.

 

[Thomas Rogers]

Gavin,



Is your credit good?



Well Fargo was "giving away" (no closing costs) refiis for the past few years, picking up customers with great credit.



Either way, do the math. 1% could save you in the long run, but you have to do the math. I suspect it would save, but ONLY if you are sure you are going to keep the home until the break-even point.



TJR

 

[Jim parnell]

why not just bump up your monthly pmt over what is required by the original note, would pay it off sooner, save the $9500 in new closing costs and still pay it off early, if the excess cash is there of course

 

[Thomas Rogers]

Jimp,



Many people can pay more principle on their mortgages each month but choose not to, and instead direct that available monies towards liquid savings, or other investments that yield a higher return. For them, *IF* refinancing is cheap (or $0) and the liklihood of staying in the home for the loan duration is high, refi'ing makes sense as it can mean a lower payment each month and lower interest paid over the remaining term of the loan.



We refi'ed our current home twice. Lowered the monthly payment AND term each time, as well as the total interest to be paid on the loan. The first refi had closing costs, the second did not.



I've heard people toss around 2% as a guide; any savings at a 2% rate drop (or higher) is worth the refi; below it is not. But I don't think there is a one-size fits all.



Amortization tables/spreadsheets are easy to come by. The analysis of the pros/cons to refi or not are easily calculated. However, their are uncertainities in the scenarios compared that just can't be known.



TJR