When to refinance

[Anonymous]

Got a loan for 6.75%. What makes sense to refinance? If the rates drop below 6? Or does it have to go a full point below for it to make sense? So 5.75%?

[Anonymous]

Do a true no cost refi where you get a credit for closing cost in exchange for not the absolutely lowest rate available (i.e. a negative point)

Or figure out when your break even where the upfront costs of refinancing is paid back by the lower monthly payment (the mortgage professor website used to have some good calculators to help with that).

[Anonymous]

So just so you know, practically all refinancing ends up benefiting the bank, not you. You have to do some serious math to figure out if any refinancing option will end up working in your favor, ie, ending up costing you LESS than the total of what you will pay with your current option, house plus interest.

There might be a benefit to lowering your monthly costs and investing the difference in the stock market. That's another way of looking at the problem. If you earn more in added value in stocks than you lose in refinancing, that could be a viable option too. But it does mean you're not using the difference in monthly mortgage payments for something else.

[Anonymous]

If you have a large amount borrowed ($700K+) then even a 0.50% rate reduction will work out in the long run, assuming you intend to keep the house for 10+ years.

You need to only do low/no-fee refinancing. Get lender credits, pay zero points, etc. The most expensive part will be the title insurance, so you absolutely need to seek out a "reissue rate", see: https://www.mortgageprofessor.com/A%20-%20Title%20Insurance/Reissue%20Rates.html

[Anonymous]

Anonymous wrote:So just so you know, practically all refinancing ends up benefiting the bank, not you. You have to do some serious math to figure out if any refinancing option will end up working in your favor, ie, ending up costing you LESS than the total of what you will pay with your current option, house plus interest.

There might be a benefit to lowering your monthly costs and investing the difference in the stock market. That's another way of looking at the problem. If you earn more in added value in stocks than you lose in refinancing, that could be a viable option too. But it does mean you're not using the difference in monthly mortgage payments for something else.

Not true. We refinanced a few times when rates were much more favorable and in all case we picked a rate that came with a credit from the bank that covered the entire cost of refinance and gave us a rate lower than the original one. The only cost was the PITA of going through all the paper work.
My answer to OP would be to refinance whenever you can lower your payment with no or minimal cost. It can make sense to do it even for .5 point reduction or less depending on the size of the mortgage. There is no arbitrary reduction in rate to wait for. Refinance whenever it saves you money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:So just so you know, practically all refinancing ends up benefiting the bank, not you. You have to do some serious math to figure out if any refinancing option will end up working in your favor, ie, ending up costing you LESS than the total of what you will pay with your current option, house plus interest.

There might be a benefit to lowering your monthly costs and investing the difference in the stock market. That's another way of looking at the problem. If you earn more in added value in stocks than you lose in refinancing, that could be a viable option too. But it does mean you're not using the difference in monthly mortgage payments for something else.

Not true. We refinanced a few times when rates were much more favorable and in all case we picked a rate that came with a credit from the bank that covered the entire cost of refinance and gave us a rate lower than the original one. The only cost was the PITA of going through all the paper work.
My answer to OP would be to refinance whenever you can lower your payment with no or minimal cost. It can make sense to do it even for .5 point reduction or less depending on the size of the mortgage. There is no arbitrary reduction in rate to wait for. Refinance whenever it saves you money.

Lower payment without cost may not result in saving money due to resetting the 30 years clock. For example, you are donw playing 7 years and only 23 years are left. Then if you set , you end up with lower payment but for 30 years.

OP - I will suggest doing it for no/low cost with at least 0.75%. It will work in most cases. 1% will surely work out.

[Anonymous]

To add with 0.75% comment, best is to run the numbers and see your break even point, but with low or no cost refinance, 0.75% rate reduction should work out fine.

[Anonymous]

Anonymous wrote:

Anonymous wrote:So just so you know, practically all refinancing ends up benefiting the bank, not you. You have to do some serious math to figure out if any refinancing option will end up working in your favor, ie, ending up costing you LESS than the total of what you will pay with your current option, house plus interest.

There might be a benefit to lowering your monthly costs and investing the difference in the stock market. That's another way of looking at the problem. If you earn more in added value in stocks than you lose in refinancing, that could be a viable option too. But it does mean you're not using the difference in monthly mortgage payments for something else.

Not true. We refinanced a few times when rates were much more favorable and in all case we picked a rate that came with a credit from the bank that covered the entire cost of refinance and gave us a rate lower than the original one. The only cost was the PITA of going through all the paper work.
My answer to OP would be to refinance whenever you can lower your payment with no or minimal cost. It can make sense to do it even for .5 point reduction or less depending on the size of the mortgage. There is no arbitrary reduction in rate to wait for. Refinance whenever it saves you money.

lol this is why people hit 65 and haven't made a dent in their principal. they've essentially rented a house from a bunch of banks for 30 years.

[Anonymous]

Watch out for declining property values. If the appraisal means that the amount you'd borrow in a refi has gone up, that means you could have to bring lots of money to the table, separate and apart from the transaction fees.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So just so you know, practically all refinancing ends up benefiting the bank, not you. You have to do some serious math to figure out if any refinancing option will end up working in your favor, ie, ending up costing you LESS than the total of what you will pay with your current option, house plus interest.

There might be a benefit to lowering your monthly costs and investing the difference in the stock market. That's another way of looking at the problem. If you earn more in added value in stocks than you lose in refinancing, that could be a viable option too. But it does mean you're not using the difference in monthly mortgage payments for something else.

Not true. We refinanced a few times when rates were much more favorable and in all case we picked a rate that came with a credit from the bank that covered the entire cost of refinance and gave us a rate lower than the original one. The only cost was the PITA of going through all the paper work.
My answer to OP would be to refinance whenever you can lower your payment with no or minimal cost. It can make sense to do it even for .5 point reduction or less depending on the size of the mortgage. There is no arbitrary reduction in rate to wait for. Refinance whenever it saves you money.

Lower payment without cost may not result in saving money due to resetting the 30 years clock. For example, you are donw playing 7 years and only 23 years are left. Then if you set , you end up with lower payment but for 30 years.

OP - I will suggest doing it for no/low cost with at least 0.75%. It will work in most cases. 1% will surely work out.

We did this multiple times— sometimes just for .25% if we got a closing cost credit. Everytime we kept up our original payment amount and put the extra to principal. Do the math and you’ll see you come out ahead (and you have flexibility if something goes wrong or you decide to our money away for something else).

Ended up paying off our house in 20 years.

[Anonymous]

We refinanced after 4 years to drop PMI on our FHA loan. We decided to drop the term down to 20 years which cut six years off the loan. Payment remained the same.

This was in 2021. So we have a three percent rate. It is our forever home.

[Anonymous]

Whenever you refinance the clock on your mortgage restarts at 30 years and interest is a larger portion of your monthly payment.

[Anonymous]

Anonymous wrote:Whenever you refinance the clock on your mortgage restarts at 30 years and interest is a larger portion of your monthly payment.

It's not so cut and dried as that. You choose the length of the mortgage when you refi--it does not have to be 30 years. We refinanced from a 10/1 ARM for 30 years to a fixed for 20 about 5 years into making payments. We got a better rate so with the switch, we only have to pay a few hundred more per month and pay down more than the increase in payments in principal each month now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Whenever you refinance the clock on your mortgage restarts at 30 years and interest is a larger portion of your monthly payment.

It's not so cut and dried as that. You choose the length of the mortgage when you refi--it does not have to be 30 years. We refinanced from a 10/1 ARM for 30 years to a fixed for 20 about 5 years into making payments. We got a better rate so with the switch, we only have to pay a few hundred more per month and pay down more than the increase in payments in principal each month now.

You could have started with the 20 year term to begin with.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So just so you know, practically all refinancing ends up benefiting the bank, not you. You have to do some serious math to figure out if any refinancing option will end up working in your favor, ie, ending up costing you LESS than the total of what you will pay with your current option, house plus interest.

There might be a benefit to lowering your monthly costs and investing the difference in the stock market. That's another way of looking at the problem. If you earn more in added value in stocks than you lose in refinancing, that could be a viable option too. But it does mean you're not using the difference in monthly mortgage payments for something else.

Not true. We refinanced a few times when rates were much more favorable and in all case we picked a rate that came with a credit from the bank that covered the entire cost of refinance and gave us a rate lower than the original one. The only cost was the PITA of going through all the paper work.
My answer to OP would be to refinance whenever you can lower your payment with no or minimal cost. It can make sense to do it even for .5 point reduction or less depending on the size of the mortgage. There is no arbitrary reduction in rate to wait for. Refinance whenever it saves you money.

Lower payment without cost may not result in saving money due to resetting the 30 years clock. For example, you are donw playing 7 years and only 23 years are left. Then if you set , you end up with lower payment but for 30 years.

OP - I will suggest doing it for no/low cost with at least 0.75%. It will work in most cases. 1% will surely work out.

The interest will still very likely be lower over that period and no one forces you to pay over 30 years. You can easily accelerate it to pay down over 23. That would be a dumb reason to not refinance to a lower rate when the refinance itself is free.