Financing -- Loans/Re-Financing
QUESTION: I currently hold a mortgage with a 6% interest rate - the balance owed is $132,429.60 - house is valued at approx 146,000. The original loan amt was $147,682 (7/1/2006). The current interest rate is at 3.5% with closing costs costing $7,300 + $500 up front fees. My current monthly payment is $1454.89 at a 30 year loan. My bank is telling me if I refinance for another 30 years at the 3.5% my monthly would be $1192 and for 15 years it would be $1561.00. I would love to pay the house off sooner, however, I am not a risk taker and would probably go with the 30 year and take part of the savings I would be getting and pay towards principle so I would not lock myself into the higher monthly with the 15 year. The question is, does it make sense to refinance even with the lower interest rate but a high closing cost ? I would be rolling the closing costs into the refinance because I do not wish to pay $7300 out of pocket. Any help or suggestions would be greatly appreciated ! Thanks
Yes it makes since to refinance, but the closing cost are TOO HIGH! Your closing cost should be no higher than $3000 (this is the high end) plus your Escrow fees!! I would also like to know what type of loan they are talking about putting you into and if they are charging you an upfront origination fee.
If I was advising you on what to do, I would have talked over a 15 year, 20 year and 25 year loan myself.
Hope this helps, and to be honest with you, you should get a second quote before making any decisions!
Sr. Loan Officer
---------- FOLLOW-UP ----------
QUESTION: Thank you for your response ! We thought the $7300 was way too high also, however, we did contact other banks and their closing costs range from $5400 to $7300 ! This is for an FHA loan in the state of NY. I just don't know with the high closing costs if it is worth it to re-finance. The breakdown of fees that I received on a quote were lender fees and points, 3rd party fees, prepaid items such as interest and insurance, and escrows account funds.
Those closing cost sound about right for a loan in NY, but you have to figure out how long it's going to take you to recover the closing cost by the monthly savings you are going to get.
EX: if you are saving $200 a month ($7300 / $2400 = 3.04 years), then you would have your closing cost paid in 3 years and then the savings would be a plus.
Hope this helps you make your decision easier... :)
Sr. Loan Officer