Refinancing Our Home

My mortgage company reached out to me a few weeks ago about refinancing our home. I knew it was a ripe time to do so and finally decided to pull the trigger.

We're 14-1/2 years into a 30 year mortgage currently at 5.85%. They quoted a couple of different options for a 15 year. One was a 3.75% with a low closing cost and the other one was for 3.375% with a somewhat higher closing cost.

Well today, my bank reached out to me because I mentioned to them in an email late last week that I was refinancing our home. They asked me how far along I was into it and I told them I had just started the process. They quoted me 3.25% for a 15 year. My goal is to keep my monthly payments the same in order to accelerate paying down the mortgage.

The upside in using my bank is the fact that they already have all of my financial data going back many years so other than supplying my homeowners insurance information, there's not much more to do but sit back and wait to close on it.

I don't think I can go wrong going from 5.85% down to 3.25%. That's a big drop.

Qball said:

My mortgage company reached out to me a few weeks ago about refinancing our home. I knew it was a ripe time to do so and finally decided to pull the trigger.

We're 14-1/2 years into a 30 year mortgage currently at 5.85%. They quoted a couple of different options for a 15 year. One was a 3.75% with a low closing cost and the other one was for 3.375% with a somewhat higher closing cost.

Well today, my bank reached out to me because I mentioned to them in an email late last week that I was refinancing our home. They asked me how far along I was into it and I told them I had just started the process. They quoted me 3.25% for a 15 year. My goal is to keep my monthly payments the same in order to accelerate paying down the mortgage.

The upside in using my bank is the fact that they already have all of my financial data going back many years so other than supplying my homeowners insurance information, there's not much more to do but sit back and wait to close on it.

I don't think I can go wrong going from 5.85% down to 3.25%. That's a big drop.

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You should have refinanced a while back!!!
Sub 4% mortgage rates have been the norm for 8 years or so.

BowWow said:

You should have refinanced a while back!!!
Sub 4% mortgage rates have been the norm for 8 years or so.

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I know. I don't know why I waited so long.

Qball said:

I know. I don't know why I waited so long.

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Run a calculator. It will come down to how much they are charging for closing costs. You have to run that against the savings in interest. A lot will depend on how much the outstanding balance of the mortgage is. Another factor to consider is do you under the new tax laws pay enough interest to itemize your taxes. That can also be a factor. I used to be a banker. There are a lot of considerations and factors that come into play.

https://www.nerdwallet.com/mortgages/refinance-calculator

On the mortgage, any auto loan we had or such we’d round up. We paid of our mortgage almost 2 years early by adding extra to monthly payments because we had loans structured for the extra “to be applied to principle”. It was surprising just adding less than $30 to your payment as long as it goes towards the principle cuts your loan time.

Banks loan money on castles?

Qball said:

My mortgage company reached out to me a few weeks ago about refinancing our home. I knew it was a ripe time to do so and finally decided to pull the trigger.

We're 14-1/2 years into a 30 year mortgage currently at 5.85%. They quoted a couple of different options for a 15 year. One was a 3.75% with a low closing cost and the other one was for 3.375% with a somewhat higher closing cost.

Well today, my bank reached out to me because I mentioned to them in an email late last week that I was refinancing our home. They asked me how far along I was into it and I told them I had just started the process. They quoted me 3.25% for a 15 year. My goal is to keep my monthly payments the same in order to accelerate paying down the mortgage.

The upside in using my bank is the fact that they already have all of my financial data going back many years so other than supplying my homeowners insurance information, there's not much more to do but sit back and wait to close on it.

I don't think I can go wrong going from 5.85% down

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Prepare to be mortified at how much documentation they are required to gather from you. I do nearly all my banking and credit cards with Wells Fargo and paid off a mortgage with them two years ago when I sold that house. 18 months later I built another one, and had them originate the mortgage. It was oppressive what they had to have in the way of documentation since very little of our income is straightforward w-2 income.

It doesn’t matter how much you have in the way of assets, it all comes down to documentable income. I guess so they can sell that mortgage, which is what they did both times.

Plus I refinanced the previous house several times as rates came down from '06 until we sold. Still had to provide mucho documentation.

I have had incredibly good experiences with Rocket Mortgage/Quicken Loans. They make the process stupidly easy - if your credit is decent.
We refi’d earlier this year to go from a ~4.5% down to mid 3. I did most of the paperwork in y PJs sitting in the couch and the closing was done in our dining room.

Another factor to consider is do you under the new tax laws pay enough interest to itemize your taxes.

No loan tax right off is worth as much as NOT having a mortgage.
Dave Ramsey.

BASIL said:

Another factor to consider is do you under the new tax laws pay enough interest to itemize your taxes.

No loan tax right off is worth as much as NOT having a mortgage.
Dave Ramsey.

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Good point. I think the “married filing jointly” standard deduction is around $24K this year. And tax deduction is limited to $10k I think.

When we put the deposit for the house in 1990, rates were 11%,
when we closed in April 1991 rates were 7%, we refinanced about a year later to around 4%,
used the builder lender, they sold the loan four times.
Refinanced with SECU and they take it out of my payroll monthly.
Agree to run the calculators and watch the closing costs.

Two of my coworker just used Rocket.

Check your local credit union. We got 3% on a 15 back in August of this year via Coastal Federal.

The documentation they need is a PITA but for the couple hours you will spend it will pay off very quickly in interest savings.


Sent from my iPhone using Tapatalk

We bought our place in Aug '08. Put 20% down, 30 yr fixed, 5.75%. 3 years later, the numbers were right & we re-fi'd at 3.25%, 20 yr fixed. Lowered our payment a hair & knocked 7 years off our mortgage. It also helped that we both have very high credit scores, so zero fuss or BS from the lender.

Icing on the cake, was that with my VA loan benefit & having a VA disability rating, there were zero closing costs or "loan origination" fees.

BASIL said:

Another factor to consider is do you under the new tax laws pay enough interest to itemize your taxes.

No loan tax right off is worth as much as NOT having a mortgage.
Dave Ramsey.

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I respect Dave Ramsey and it’s obvious his program helps tons of people. However, I don’t believe his “debt is evil” approach is fitting for everyone. I’m not sure it will always be the case but, until now, this is what’s working for me...

I was able to refinance a few years ago at 3.5% fixed for 30 years with zero costs of any kind. The current loan replaced a previous refi. For sure I will not be around to make the last payment on the loan but I am NOT accelerating the payments (i.e., paying extra towards principal to reduce the loan’s term). Why? Because I’ve been able to find investments for that money that earn more than 3.5%. In other words, I’m making a profit on the loan so have no interest in paying it off early.

If the day comes that I can’t make that spread between 3.5% and investing, I may change my mind. For now, I’m happy to be in debt and owe Chase money. It’s a gamble but so far it’s working for us. Just another point of view. Obviously, YMMV.

Tim said:

I have had incredibly good experiences with Rocket Mortgage/Quicken Loans. They make the process stupidly easy - if your credit is decent.
We refi’d earlier this year to go from a ~4.5% down to mid 3. I did most of the paperwork in y PJs sitting in the couch and the closing was done in our dining room.

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Similar here.....IIRC it was Quicken loans ans the had we never had to leave the house.

Just occurred to me that the reason you can't shoot well, @Jeppo, is all those hours at the computer placing orders to outperform your bank's mortgage.

Downsize, and you'll suddenly be able to choot like an Ace!

Meanwhile, yer bankers are playing golf... jus' sayin'!

fieldgrade said:

Prepare to be mortified at how much documentation they are required to gather from you. I do nearly all my banking and credit cards with Wells Fargo and paid off a mortgage with them two years ago when I sold that house. 18 months later I built another one, and had them originate the mortgage. It was oppressive what they had to have in the way of documentation since very little of our income is straightforward w-2 income.

It doesn’t matter how much you have in the way of assets, it all comes down to documentable income. I guess so they can sell that mortgage, which is what they did both times.

Plus I refinanced the previous house several times as rates came down from '06 until we sold. Still had to provide mucho documentation.

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My bank is one I've used for a business and personal purposes over the last 18 years. They have all of my tax returns, personal financial statements, insurance information, estate planning information, life insurance information, and anything else I haven't thought of.

MacEntyre said:

Downsize, and you'll suddenly be able to choot like an Ace!

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In the next couple of years, that's our plan. We want to find a smaller single story house on a large plot of land out in the country somewhere.

Needs to have a huge garage however. If we can't find one with a big garage, I'll build one.

Crazy Carl said:

We bought our place in Aug '08. Put 20% down, 30 yr fixed, 5.75%. 3 years later, the numbers were right & we re-fi'd at 3.25%, 20 yr fixed. Lowered our payment a hair & knocked 7 years off our mortgage. It also helped that we both have very high credit scores, so zero fuss or BS from the lender.

Icing on the cake, was that with my VA loan benefit & having a VA disability rating, there were zero closing costs or "loan origination" fees.

Click to expand...

My credit rating is one thing I don't have to sweat.

Jeppo said:

I respect Dave Ramsey and it’s obvious his program helps tons of people. However, I don’t believe his “debt is evil” approach is fitting for everyone. I’m not sure it will always be the case but, until now, this is what’s working for me...

I was able to refinance a few years ago at 3.5% fixed for 30 years with zero costs of any kind. The current loan replaced a previous refi. For sure I will not be around to make the last payment on the loan but I am NOT accelerating the payments (i.e., paying extra towards principal to reduce the loan’s term). Why? Because I’ve been able to find investments for that money that earn more than 3.5%. In other words, I’m making a profit on the loan so have no interest in paying it off early.

If the day comes that I can’t make that spread between 3.5% and investing, I may change my mind. For now, I’m happy to be in debt and owe Chase money. It’s a gamble but so far it’s working for us. Just another point of view. Obviously, YMMV.

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Actually your situation is exactly the situation I am in right now. All of my cash is in my bank generating income at an interest rate higher than the current mortgage rates. Therefore, my bank already has all of my income documentation.

Jeppo said:

I respect Dave Ramsey and it’s obvious his program helps tons of people. However, I don’t believe his “debt is evil” approach is fitting for everyone. I’m not sure it will always be the case but, until now, this is what’s working for me...

I was able to refinance a few years ago at 3.5% fixed for 30 years with zero costs of any kind. The current loan replaced a previous refi. For sure I will not be around to make the last payment on the loan but I am NOT accelerating the payments (i.e., paying extra towards principal to reduce the loan’s term). Why? Because I’ve been able to find investments for that money that earn more than 3.5%. In other words, I’m making a profit on the loan so have no interest in paying it off early.

If the day comes that I can’t make that spread between 3.5% and investing, I may change my mind. For now, I’m happy to be in debt and owe Chase money. It’s a gamble but so far it’s working for us. Just another point of view. Obviously, YMMV.

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Truth. No debt works for some but for others if you can make more $$$ than you are being charged in interest for debt. You can work the system both ways.

Qball said:

In the next couple of years, that's our plan. We want to find a smaller single story house on a large plot of land out in the country somewhere.

Needs to have a huge garage however. If we can't find one with a big garage, I'll build one.

Click to expand...

If you are selling your house in a few years closing costs are going to kill the savings from refinancing because the time to recoup the closing cost vs interest savings is too short.

I would think that the 2% difference in the loan interest would be better if you are looking to lower payment if you are planning to keep for the duration or pay off early. It's been a while since I ran an amortization table, but should be good. Shop around and let them come to you... !

We did a 30 in 2002, refi in 2006, refi in 2010 and refi in 2015.. all lower rates and shorter duration. We backed the equity out and invested at rates higher than the interest on the loan for a payout when we are ready... that way, we didn't go underwater but actually in the clouds... We will end up paying off in 2025 and will have banked the equity 2x over and never had a payment go up.. only down significantly.

Normally you can't do this, but we just hit the market right on the ride down with rates.... and we didn't refi our cash to pay for things... we invested it in risk free rates + acceptable returns.

I think that Ramsey is right for most people.. but we used the lower rates to our advantage. I doubt that rates will ever do this again in our lifetime... as an Economics guy.. this has never happened in modern history.

wvsig said:

If you are selling your house in a few years closing costs are going to kill the savings from refinancing because the time to recoup the closing cost vs interest savings is too short.

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I thought of that. Once I get all the numbers that will help me decide what we want to do.

I appreciate all of the feedback and tips folks. This forum and the knowledge of our members never ceases to impress me.

I built mine in 88 after we got married. Financed it for 20, paid it off in 15. Built on family land with the thought of being here till the end. Updated everything last year except the kitchen and one bath. I’ll get around to them this year sometime. We paid out of pocket for all but a little that we put on our home equity. We’ll pay that off soon. I’m upgrading the barn as a workshop and a small guest house with a kitchenette and bath (dog house for me!) I built in the middle of 30 acres down in the woods away from the main road. I’ll be 60 next May and will have everything paid for except my truck and Jeep. My wife has been the financial brains in our family since I was gone a good portion of the time. She never pays interest on a credit card and paid more than the original house payment. I feel extremely blessed to have her. We didn’t make huge money by being a Soldier and a nurse, but we put our money in the right places and it worked! It can be done on smaller incomes!

MacEntyre said:

Just occurred to me that the reason you can't shoot well, @Jeppo, is all those hours at the computer placing orders to outperform your bank's mortgage.

Downsize, and you'll suddenly be able to choot like an Ace!

Meanwhile, yer bankers are playing golf... jus' sayin'!

Click to expand...

I remember in when interest rates on CD's were 15%, passbook savings accounts paid 5.5%
and prime rate was 21.5% in 1982. I worked the bank teller line before moving into the data center in NYC.

I hope you signed your name the exact same way on every line. What a PITA. The lady doing the paperwork would not allow me to change my Sig from original or refinance. And apparently the original guy had me signing full name here, just middle initial there, doesn't matter which here, initials here. I about lost my mind. But for that kind of drop, yeah I'd put up with the hassle.

We refinanced a couple months ago and got a 3.15 on a 20 year note. Last year was the first year I haven’t needed to itemize with the standard deduction being so high. Normally if you can drop a full point and will be there for a few years, it makes complete sense.

Carolinatlc said:

We refinanced a couple months ago and got a 3.15 on a 20 year note. Last year was the first year I haven’t needed to itemize with the standard deduction being so high. Normally if you can drop a full point and will be there for a few years, it makes complete sense.

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After working in the mortgage industry for a few years I learned that there are no hard and fast rules if you are actually trying to help the consumer. Everything is variable. I would have people come in and want to refinance and they only owed 50-65K with 15 years left on their 30 year note. When you looked at a 1 point drop in the rate over the same period of time against the cost of closing, which you are always paying upfront or in the rate, it did not make sense to refinance. It made sense for the bank which was going to pocket the closing costs and then sell the loan within 90 days but for the homeowner it was at best a break even. I would advice them that they are already passed the heavy interest part of their loan. That on the current note they are sending 50% + to principle vs interest. They would be better off sending extra principle vs refinancing. If you are going to sell the home in the near future 2-5 years it makes even less sense. Change that note to only 5 years in on a 30 and a 300K note and the equation is totally different.

You have to run your exact numbers with the exact cost of closing and then calculate how long you plan on being in the house. The numbers will not lie. The bank will.

Find a mortgage where you can overpay without penalty and get rid of your mortgage faster. Even a couple hundred more will knock off months if not years of interest.

Jeppo said:

I respect Dave Ramsey and it’s obvious his program helps tons of people. However, I don’t believe his “debt is evil” approach is fitting for everyone. I’m not sure it will always be the case but, until now, this is what’s working for me...

I was able to refinance a few years ago at 3.5% fixed for 30 years with zero costs of any kind. The current loan replaced a previous refi. For sure I will not be around to make the last payment on the loan but I am NOT accelerating the payments (i.e., paying extra towards principal to reduce the loan’s term). Why? Because I’ve been able to find investments for that money that earn more than 3.5%. In other words, I’m making a profit on the loan so have no interest in paying it off early.

If the day comes that I can’t make that spread between 3.5% and investing, I may change my mind. For now, I’m happy to be in debt and owe Chase money. It’s a gamble but so far it’s working for us. Just another point of view. Obviously, YMMV.

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I think Dave Ramsey's view is borne out of decades of watching people fall into the debt trap that has been carefully crafted to make bankers rich, rather than threading the needle that you have been able to thread. Some people can do it and come out ahead. The vast majority of people do it and wind up paying more while enriching others. He is trying to help that second group.

cubrock said:

I think Dave Ramsey's view is borne out of decades of watching people fall into the debt trap that has been carefully crafted to make bankers rich, rather than threading the needle that you have been able to thread. Some people can do it and come out ahead. The vast majority of people do it and wind up paying more while enriching others. He is trying to help that second group.

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I agree with this but like most "systems" it is too rigid. It does not account for changes in the marketplace and it does not give people enough tools to navigate the system. It gives them a road map but but not the tools to know when to get off the highway. He is not teaching people true financial literacy. He is giving you bits and pieces to lead you to buy his stuff.

He is selling you a system. He is like the Blue Apron of financial planning. Just because you can make a meal out of the stuff Blue Apron sends you does not mean you can cook. Just because you read and follow Ramsey does not mean you are financially sound. I think he does preach to a certain level and for them provides a structure which can help keep them out of total financial ruin but his way is not the only way. I think some of his advice is good but if you are following his system rigidly you are just swapping who you are enriching. Make no mistake that Dave is trying to help Dave. He is in it for his financial gain more than anyone else's. Kind of like the banks. IMHO

@cubrock & @wvsig
I think we’re on the same page. I’m convinced DR’s program is a lifesaver for those that get in over their heads and/or aren’t fully capable to manage money, spending, debt, etc. My only issue is with the blanket message that debt is evil.

Jeppo said:

@cubrock & @wvsig
I think we’re on the same page. I’m convinced DR’s program is a lifesaver for those that get in over their heads and/or aren’t fully capable to manage money, spending, debt, etc. My only issue is with the blanket message that debt is evil.

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Debt has a place, and can be a tool. It must be managed. The fact that most people (certainly not casting an accusatory glance at anyone here...) view consumer debt as just a thing and no big deal speaks volumes about peoples' inability to manage money... And I do not dig the hypocrisy of a lot of people (again, not here...), two incomes, two new vehicles and a big-ass house, then bitch about not having any money....

Jeppo said:

@cubrock & @wvsig
I think we’re on the same page. I’m convinced DR’s program is a lifesaver for those that get in over their heads and/or aren’t fully capable to manage money, spending, debt, etc. My only issue is with the blanket message that debt is evil.

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Yeah the whole all debt is evil is overly simplistic.

Jeppo said:

@cubrock & @wvsig
I think we’re on the same page. I’m convinced DR’s program is a lifesaver for those that get in over their heads and/or aren’t fully capable to manage money, spending, debt, etc. My only issue is with the blanket message that debt is evil.

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I think we are on the same page, overall. But, I do think the debt/banking system of our society is evil and has evil roots aimed at the enslavement and subjugation of the average person. It is based on the intentional devaluing of everyone's currency to force us to continue to work within the financial system just to tread water, then skim off all our work as much as possible, be it through debt, financial fees, costs of regulatory compliance, etc.

If you can find a way to make a win out of it, then you should and I applaud you. You have obviously done well for yourself, to include making debt work for you right now, and that is commendable.

Chuckman said:

Debt has a place, and can be a tool. It must be managed. The fact that most people (certainly not casting an accusatory glance at anyone here...) view consumer debt as just a thing and no big deal speaks volumes about peoples' inability to manage money... And I do not dig the hypocrisy of a lot of people (again, not here...), two incomes, two new vehicles and a big-ass house, then bitch about not having any money....

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Have family members that made consistently over $500k a year for at least the last 10 years between them. One got laid off for around 6 months but that included a 3 month severance. It sounded like their world was going to end. Couldn't get the new fancy vehicle they get every 2 years, had to pair down to one big vacation from 2-3 a year, told family members they might need to borrow money if this lasted much longer. Here I am single income supporting a family of 5 on much less than $500k a year just laughing.

Carolinatlc said:

Have family members that made consistently over $500k a year for at least the last 10 years between them. One got laid off for around 6 months but that included a 3 month severance. It sounded like their world was going to end. Couldn't get the new fancy vehicle they get every 2 years, had to pair down to one big vacation from 2-3 a year, told family members they might need to borrow money if this lasted much longer. Here I am single income supporting a family of 5 on much less than $500k a year just laughing.

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I am a nurse, 6 kids, single-income (we homeschool), we payed our 30-year mortgage in about 7 years. When people say "I can't do it" I throw the bullshit card. For most people it's not because they can't, they just don't want to.