I'm really thinking of refinancing

[Balog]

We've been at our house for a bit over a year, both still solidly employed at the same company and making more now than we did when we got the loan with excellent credit. Rate is a solid but unspectacular %5 on a 30 year fixed VA guaranteed loan. I'm still a newb at all this, so I don't even know where to start. Contact the current bank that services the loan? The bank that originated it? One of the elevnty billion companies sending me letters asking me if I want to refinance?

[Brad Johnson]

Rates on a no-buydown, no-points fixed 30 are hovering at around 4% right now.  Unless you plan on staying in your house more than 7-10 years, you won't save enough to cover the cost of the refi.

Also, refinincing from 5% to 4% will only save you a whopping $58 per $100k mortgage value.

Brad

[Balog]

Rates on a no-buydown, no-points fixed 30 are hovering at around 4% right now.  Unless you plan on staying in your house more than 7-10 years, you won't save enough to cover the cost of the refi.

Also, refinincing from 5% to 4% will only save you a whopping $58 per $100k mortgage value.

Brad

Assuming we stay in our house at least another 5 years (which is a fairly safe assumption, barring major life upheavals) would points/buydown be a decent option?

[bscl]

I've been thinking about this too - we are about seven years into a 30-year fixed at 5.25%.  The mortgage broker who handled our previous mortgage has called me at least twice since the start of this year to inform us of our options.  He mentioned that we could use lender credit to pay off the cost of the loan - I had never heard of this previously. 

[roo_ster]

Assuming we stay in our house at least another 5 years (which is a fairly safe assumption, barring major life upheavals) would points/buydown be a decent option?

Not an expert, but points don't sound like a good idea, IMO.  Spending current dollars to save future dollars that will be inflated down to a fraction of present value sounds like a bad deal.

Also, look at the APR.  Doesn't give the whole story, but many times the "lower rate + points" loan has a higher APR.

[Brad Johnson]

Assuming we stay in our house at least another 5 years (which is a fairly safe assumption, barring major life upheavals) would points/buydown be a decent option?

To get a quarter point off your interest rate will probably cost you about 1.5-2% on a buydown plus administrative fees which, depending on your lender, can be as little as $1000 or as high as $2500.    As of today that quarter point buydown will get you 3.625 fixed on a 30 yr note.

Using today's rate, a $100k balance, an average of somewhere around $1500 in fees, a 2% buydown, and roughly $500 in title work and closing costs, you'll have right at four grand in the refi.  Amortized over five years that's $66.67 a month you'd need to save to cover the expense.

Using the same $100k balance and going from 5% fixed to 3.625% fixed will save you $79.97 a month (principal and interest payment of $456.05 vs $536.82) over your current payment.  Given the 5-year amortized expense of the refi, your net savings is a whopping $13.30 a month. 

Keep in mind that's a five year figure.  If you stay in the house longer the savings begins to add up, making for significant savings over the total 30 year life of the mortgage.  The real issue here is how long do you intend to stay in the home.  If it's a minimum of five years with the possibility of many more after that, a refi could be a real boost for you down the road.  If you plan on staying a maximum of five years, stick with what you have.

If you want to go forward with the refi, give me a call or a PM.  I have some local lenders that are rock solid, rate competitive, old-school straightforward, and their total fees are the lowest I've found (less than $1k on average).  Not only do they beat the pants off of Big Bank and the internet lenders in terms of rates and fees, they process everything in-house, including underwriting, so none of this "oh, for that question you need to call our processing center in Florida" crap.  An added bonus is that a human answers the phone when you call.  Plus, the loan officer who helps you get your application ready is same person who processes the loan, not a flunky who gets all the paperwork done then ships your account of to some out-of-state processing center where you have to wade through autoattendant hell to reach someone who might be able to answer your question.

Brad