Mortgage Refinance Questions Help!!?
by Mortgage Rates on Wednesday, September 15th, 2010 | 4 Comments
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me too
5,000 to close is robbery. Try a bank.
The money that you put down is not lost. It is “equity” in your house. Let’s assume you sold the house. On the open market, it fetches $300,000. You pay back the loan balance and keep whatever is left over. That would be, the money you put down ($30,000), plus a return on that money.
As far as refinancing goes, I believe the second option is better, assuming you have the extra cash. The way to compare is to assume that, for the first option, you put the excess closing costs down on the house ($5000-1700). Then see which payment is lowest.
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It depends on what you mean by “thrown away”. The interest you paid was the time cost of money. By loaning you the money, the bank foregoes other investment options. You lived in a quarter million dollar house without paying in full. I would not call that money “thrown away” (and it is a tax write off).
Also, if you rented, you still would have to pay rent.
If you look at an amortization table (payment schedule) breaking down your principal and interest payments based upon your interest rate and the term of the loan (360 months i’m assuming) you will see that the initial payments are frontloaded primarily with interest. To check out one of these payment schedules go to http://www.mortgage-x.com and just enter your scenario.
Speaking to the 2 deals you’ve been offered and their benefits/drawbacks…
How long do you plan on being in the property? Thats really the question to ask yourself. If you plan on being in the property for quite a long time (10 years? 30?) then its more than likely a better financial investment to pay the higher closing costs and get the better rate. The additional fees (potentially a buydown?) will wash out in the long run. If this is the case, just make sure that the loan program you’re getting yourself in to is fixed for a long period of time as well so you dont have to worry about adjusted rates that will mitigate your long term savings. If you want to go over your situation in detail I’d be more than happy to point you in the right direction.
Daniel Algieri
Loan Specialist
dalgieri@pacifina.com
(888)202-2015 x 1491
(888)202-2015 x 6074 (cell)
PS – Heres how the calculations work. $2056 (offer A) – 1937 (offer B) = $119 savings/month.
Now just find out the difference between the closing costs.
5000-1700 = 3300. Divide the difference in costs by the monthly savings…. you’ll get 27.73…. so if you’re in the loan, and its fixed for longer than 28 months, the 2nd deal will leave you in a better situation. The converse is true if you plan on being in the loan for less than 28months or if the loan is fixed for less than 28 months.