Reply to Know of any lenders offering a no cost refi?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We are doing a refi with penfed with closing costs paid for.... We locked in at 3 percent for 5 years after which the rate goes up to 5 percent for 5 years... God willing we hope to be out of our townhome within the next year or two[/quote]

I think you mean the rate could go up to a max of 5% after 5 years - it's not certain rates will rise that much. Anyway, this is a good illustration. By all accounts this is a great mortgage product. But if you wanted to pay closing costs up front, you could have done at least 25 bps better on the rate - and possibly 50 bps or more - which means after a few years you would be ahead if you paid the closing costs up front (depending on size of loan). But this sounds like a great option considering you might be out of the house in a couple of years (as long as you don't have to pay a prepayment penalty).

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We're currently refinancing w/Pen Fed using the 5/5 arm and locked in at 3% rate.  We noticed that the rates have since dropped to 2.875%.  It costs .0625% of the total loan amount to re lock at 2.875% and our loan will be about $720K.  I cant figure out if we should even consider doing this or not.  I'm not totally certain I'm calculating this correctly, but I think it would cost $4,500 to re lock at the lower rate and that we'd save only about $1800/year, so the breakeven point would be at about two and a half years.  Does this sound about right?[/quote]

To calculate breakeven, you should look only at your incremental interest savings. I calculate a little less than $900 total savings in that first year. So that is more like a 5 year breakeven if you paid $4,500 for it. And that is pre-tax, so the real difference to you is even less. And after 5 years, your rate would reset anyway. So no, doesn't seem worth it to me. [/quote]

Thanks PP - I thought my math was off somehow-[/quote]

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