To refinance or not

[SimplyMama]

We were considering refinancing our home even though we would like to move in a few years. The sooner the better, but we took a big hit with the market. We have lost 20% of our home value.

Anyways we were considering refinancing from our 30 year (which we have about 25 years left on...we already refinanced once in early 2009) down to a 20 year fixed and according to calculators we could recoup our costs in about 11 months. Personally some of the costs are more of an annoyance than a loss in my book, as we have to pay them either way (upfront property taxes and hazard insurance) and will get a refund from our existing escrow account to make up for some of it. But still it will involve us putting about 5K out of pocket right now because we don't want to increase our mortgage at all. We will likely get a 1500 refund from our current escrow.

We were quoted 3.5% (0 points rate) late Friday, we had a few questions which the guy answered yesterday, and today when I called to lock in, the agent told me rates had actually dropped a bit and that I'd get a bit of a credit towards closing. Great!! Then 5 minutes later he emails me and tells me that rates were updating as we talked and now it would be 3.625.

It's not a huge difference, but enough to make me reconsider because when we first started all this he had thrown around 3% as our likely rate and that's what got me to really think hard about it in the first place.

I just can't decide. If we stay here 2 years, it seems we'll make about 4K off of the refinance. If we are stuck here longer, than of course it will be more. I guess it's a good deal, but I'm just so upset over losing the 3.5. Not sure if I should ride the tide and hope it comes back down or go ahead and lock today.

Any thoughts? I have so many regrets over buying this house. We are a large family, and needed some more space, but we could have just stayed put and had our old home paid off in about 5 more years. I just don't want to make any more mistakes that I can't fix.

[catherine]

I am not a finance person, and there are some guys here who can help you with the nuts and bolts of the %age points in a flash.

But I have to say that I just refinanced my house. I had a 30 year at 6.25 with 22 years left. I was plugging away with but thought I would just look into the refi and was able to get a 15 year for 3.25. I am SO HAPPY I did that! I'm paying so much less interest. Already, 2 months in, the principal is being paid down at a noticeably faster rate than my 7 year old mortgage.

I'll let someone else figure out the impact of the extra .125, but that wouldn't be a deal breaker for me. I'd go for it.

[try2bfrugal]

Any thoughts? I have so many regrets over buying this house. We are a large family, and needed some more space, but we could have just stayed put and had our old home paid off in about 5 more years. I just don't want to make any more mistakes that I can't fix.

Ask what the rate would be on a no point, no fee loan and see if that is less than your rate now. There is no pay back period on a true no point no fee loan. All it costs is your time. Also, shop around for the best rates. We usually use a local credit union. You can also get a variety of quotes from Costco. Penfed comes up a lot in the financial forums for good rates from time to time. The lowest rates are usually at Amerisave.com but they have some mixed reviews. But those are usually some of the lowest rates I ever see, so you can sometimes use the Amerisave rates as a negotiation point with other lenders. Just say something like, well if you can't match the Amerisave rates can you come close? What's the best you can do for me?

Remember the rates they quote first are usually not their best rates. You can sometimes negotiate something lower if they know you are shopping around. Forums like fatwallet and bogleheads usually have some kind of current thread with the lowest rate lenders.