To refinance or to not refinance that is the ?

I am always getting those flyers in the mail about saving up to 50% on our monthly mortgage.

I know that is most likely going to be TGTBT in our area and I also worry what the "catch" may be (i.e paying more interest or balloon payments down the line).

I called about 9 months ago to inquire with one company, but never went through with it (the guy was saying he was going to be able to reduce our monthly payment between $100-$200.00).

Do you think it's worth it?

What does it usually entail?

I am kinda clueless on this stuff and also lazy too.

Re: To refinance or to not refinance that is the ?

I don't know if it pertains to all refinances, but when I inquired about it, they would reduce my rate by $200 a month...BUT the amount of time left on my mortgage would go back up to 30 years. That was the 'catch' on mine.

Re: To refinance or to not refinance that is the ?

We just refinanced. It was worth it to us, b/c we took extra money out to consolidate debt. We had credit card debt and 2 home equity loans. We only had 8 yrs left on the mortgage, but we were never going to pay those credit cards off at the rate we were going. So we refinanced to a 15 yr. Got a slightly lower rate...mortgage is $200 less a month, PLUS we're saving more than $2500/month not paying the other debt. It was a no brainer for us.
The closing costs are high. That was the only negative. If you decide for refinance, ask about CEMA. It's something you apply for to not pay NYS mortgage tax or something.

Find a good mortgage calculator online and run the numbers. The process itself was easy. It took about 5 weeks from application to closing.

ETA: It would only be worth it if your interest rate were going be at least 1.5 pts lower than you're paying now.

Message edited 7/29/2011 2:22:33 PM.

Re: To refinance or to not refinance that is the ?

Thanks for the feedback girls.

Re: To refinance or to not refinance that is the ?

In general, the rule is that it's only worth it if you lose at least 1 point on your rate.

It also depends how long you plan to be in your house.

So let's say you save $200 a month due to the mortgage rate ($2400 per year). You are not saving right away since you also paid closing cost for refininancing. So if you spent $5000 in closing cost to refinance (arbituary number here!), and you save $200 per month, it will take you a bit over 2 years to break even. I am OVERLY simplifying it.

Re: To refinance or to not refinance that is the ?

It depends on what the bank will offer you. Just because the flyer states 4.825 interest rate doesnt mean you will get it, it may require stellar FICO or points on top.

Generally its worth it if the interest is at least 1 point or more. DHs interest rate is 5.375% but aftee the refi, ut will drop to 4.875- the only reason he agreed to refi (the bank called him several times, he had no desire to refi) was because he wont pay any closing costs. He will save $100/mo but hes paying more than the minimum so the house will get paid off im 20 yrs instead of 30.

Call around and get quotes, and compare GFEs (Good Faith Estmates). Remember closing costs can make refinancing not worth it..

Re: To refinance or to not refinance that is the ?

Can you do a mortgage modification? They're typically cheaper (b/c you don't have to close again) but you still get a lower rate.

eta: what's TGTBT mean?

Message edited 7/30/2011 3:21:25 PM.

Re: To refinance or to not refinance that is the ?

too good to be true!

Re: To refinance or to not refinance that is the ?

Re: To refinance or to not refinance that is the ?

We refinanced last year. Our mortgage payment stayed the same but we dropped 7 years off our mortgage. In the end we will save about 200K in morgage payments.

Re: To refinance or to not refinance that is the ?

one thing that frustrated my sister was that they did not get the money they had in escrow back. They applied it to the principal, but they had to build up their escrow again, so that took a big chunk.