Home Refinance Tips?

  • Posted by a hidden member.
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    Mar 13, 2012 9:00 PM GMT
    I've been thinking for a long time about refinancing my home, but I'm not really sure about where to start. I could always go talk to a financial consultant, but I usually like to go in armed with information about how it works.

    I'm not looking for a complete answer here. Maybe someone has links to an unbiased source of information?

    Any help would be appreciated! Thanks!

    (Edit: This isn't the right section for this topic. There isn't one.)
  • Webster666

    Posts: 9217

    Mar 13, 2012 10:09 PM GMT
    DO NOT let them talk you into a loan that is for a greater number of years than your current loan.

    If you can afford to make higher monthly payments, do just the opposite: get a loan that will be paid off in fewer years.
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    Mar 13, 2012 10:12 PM GMT
    Webster666 saidDO NOT let them talk you into a loan that is for a greater number of years than your current loan.

    If you can afford to make higher monthly payments, do just the opposite: get a loan that will be paid off in fewer years.


    Well duh to the second part.

    P, refinancing is tricky. Remember, most of the interest is paid off up front, so what you are paying back is the principle towards the end. Many times we jump the gun and refinance when IR are lower, however we end up paying more interest overall, and get stuck paying more money out of the pocket. Yes the monthly payments are lower, but trust me when I say the companies want you to refinance and not because it is better for you (all the time).

    So here is what you need to consider: How long have you been paying off your home.

    What interest rate do you currently have it at?

    Can you afford your current monthly payment?

    Thats about all I can think of for now. I mean, yea if you are paying 10% interest it might be cheaper overall to refinance but ask for an amortization schedule and get a current one for your mortgage before doing anything.
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    Mar 14, 2012 12:50 AM GMT
    Thanks guys!

    Yeah, I figured that any loan officer would try to talk me into paying as much interest over my lifetime as possible. That's exactly the opposite of what I'm trying to do.

    I've been paying my mortgage for over 10 years, but as Chainers said, that's mostly paying interest, not principle. My interest rate is 6.5%, which I think is still pretty decent.

    I had two different ideas with this refinancing plan. The first was that if I can reduce my monthly payments, I can pay off the mortgage faster. I'm financially disciplined enough to do it. I had a five year plan to have it paid off already, but something bad happened, and I couldn't do it. Even if I don't refinance, I plan to start saving again to pay it off early. The second idea was that if I reduce my monthly payment and something bad happens, like I lose my job, I'll be able to survive longer or be able to get a lower paying job and still keep my home. Sure, I'd be paying more interest, but at least I'd keep a roof over my head. I can afford my current payment just fine. My payment hasn't increased that much over the years, and I'm making a lot more money now than when I first bought the place.

    Another factor that might effect how I do this is that I had to get an FHA mortgage when I bought this home. I had no credit history at that time. Now that I'm older and more established, I might be able to get a better deal.
  • Posted by a hidden member.
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    Mar 14, 2012 1:29 AM GMT
    If you're at 6.25% and plan to stay in the home for quite a while longer, you really should refi the loan. With great credit, you should be able to score a 15-20 year term at well under 4%.

    Over the life of the loan, that adds up to serious coin.

    As far as resources, check out Clark Howard's web site. Clark is great at this stuff, and there are user forums as well.

    http://www.clarkhoward.com/

    Another good personal money management site worth considering is Mint ...

    https://www.mint.com/

  • turtleneckjoc...

    Posts: 4685

    Mar 14, 2012 1:44 AM GMT
    You expressed a desire to pay your mortgage off before the term is up, and mentioned paying extra on a 30 year note. Why not consider a 15 year mortgage instead? You would likely pay more in principal and interest per month, however, the note will be paid off much sooner and in the long run you will be paying much less in interest. Have your banker or mortgage specialist show you the numbers of P&I on a 15 year vs. 30 year note.

    It wasn't mentioned, but are you taking out your equity in your home or just basically "flipping the note," which is a refi of the payoff without adding money?
  • Posted by a hidden member.
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    Mar 14, 2012 1:52 AM GMT
    Hey, Apple Credit Union is offering 3.875% for 30 yr fixed. Lower rates are available if your term is shorter. icon_wink.gif
  • Posted by a hidden member.
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    Mar 14, 2012 3:28 AM GMT
    Thanks for your help, everyone. I need to find a few more things before I go much further. I need to find out my current credit score. It should be good, but you never know what people are putting on there. I plan to get numbers for a 15 and 20 year mortgage. I'd hate to get another 30 year. That would seem like going backwards, and it's hard to imagine I would save any money that way.
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    Mar 14, 2012 3:59 AM GMT
    Sugar daddy?
  • OptimusMatt

    Posts: 1124

    Mar 14, 2012 4:07 AM GMT
    Call me tomorrow - if you're FHA I can refinance you.

    Your 6.5% interest rate is atrocious, and the only way you're going to shorten your term is if you have equity in the home. If you don't, a 6.5% is a hallmark of the 2008ish rates and I CAN do better.

    Most of the time for the "over 6er's" you will be paying the same amount in principal as you are now. Not a guarantee but it's typically how it works out.

    If you have 20% equity in the home you can have the MIP dropped but if you don't...you're pretty much up shit creek without a paddle.

    I've sent you my office number - don't dismiss it out of hand. I'm legit and I can help you.

    DudeInNOVA saidThanks guys!

    Yeah, I figured that any loan officer would try to talk me into paying as much interest over my lifetime as possible. That's exactly the opposite of what I'm trying to do.

    I've been paying my mortgage for over 10 years, but as Chainers said, that's mostly paying interest, not principle. My interest rate is 6.5%, which I think is still pretty decent.

    I had two different ideas with this refinancing plan. The first was that if I can reduce my monthly payments, I can pay off the mortgage faster. I'm financially disciplined enough to do it. I had a five year plan to have it paid off already, but something bad happened, and I couldn't do it. Even if I don't refinance, I plan to start saving again to pay it off early. The second idea was that if I reduce my monthly payment and something bad happens, like I lose my job, I'll be able to survive longer or be able to get a lower paying job and still keep my home. Sure, I'd be paying more interest, but at least I'd keep a roof over my head. I can afford my current payment just fine. My payment hasn't increased that much over the years, and I'm making a lot more money now than when I first bought the place.

    Another factor that might effect how I do this is that I had to get an FHA mortgage when I bought this home. I had no credit history at that time. Now that I'm older and more established, I might be able to get a better deal.
  • OptimusMatt

    Posts: 1124

    Mar 14, 2012 4:15 AM GMT
    And have you re-fi'd before or are you on the original mortgage? If you've been on the same mortgage for 10 years now then go to zillow.com, check out your estimated value, and if you're below 80% LTV call your lender and have them drop the MIP.
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    Mar 14, 2012 4:21 AM GMT
    I appreciate the advice, but I'm not comfortable calling someone I don't know and giving them a bunch of my personal information. I'll look up some of the terms you gave me. Thanks.
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    Mar 14, 2012 4:24 AM GMT
    DudeInNOVA saidI've been thinking for a long time about refinancing my home, but I'm not really sure about where to start. I could always go talk to a financial consultant, but I usually like to go in armed with information about how it works.

    I'm not looking for a complete answer here. Maybe someone has links to an unbiased source of information?

    Any help would be appreciated! Thanks!

    (Edit: This isn't the right section for this topic. There isn't one.)


    How about remodeling your home? Watch enough HGtv and you'll get some ideas how to increase the worth of your house, then turn around and rent it out and buy another; and sell it after it's lost it's monetary value? I don't know the first thing about "Refinancing", but I know you should whatever it takes make a dime off of what you already got, to YOUR benefit ;) .
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    Mar 14, 2012 4:27 AM GMT
    DudeInNOVA saidI appreciate the advice, but I'm not comfortable calling someone I don't know and giving them a bunch of my personal information. I'll look up some of the terms you gave me. Thanks.


    Ask people for a referral and find a professional. They will be able to help you more than we could.
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    Mar 14, 2012 4:28 AM GMT
    Captain_Awesome saidHow about remodeling your home? Watch enough HGtv and you'll get some ideas how to increase the worth of your house, then turn around and rent it out and buy another; and sell it after it's lost it's monetary value? I don't know the first thing about "Refinancing", but I know you should whatever it takes make a dime off of what you already got, to YOUR benefit ;) .


    I have ZERO remodeling skills. I guess I need to date someone who does. icon_confused.gif
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    Mar 14, 2012 4:30 AM GMT
    Chainers saidAsk people for a referral and find a professional. They will be able to help you more than we could.


    That's what I plan to do. This topic has been useful for giving me terms to look up and for organizing my thoughts on what I need to do.
  • OptimusMatt

    Posts: 1124

    Mar 14, 2012 4:36 AM GMT
    Do as you wish - it was a bit of a harder pitch than I usually make but *shrugs*

    If you have value, get a conventional mortgage and drop to a 20 year term. If you don't, look into the streamline program - its the only other option.

    Most people (wrongly) assume they'll be on the same mortgage for the entire term.
    You may not know me from shit but consider the fact that I publicly stated this - if I worked for the kind of company that would screw you, I wouldn't have posted it here, where it can very publicly be traced back to me.

    *shrugs*

    Best of luck.
  • Posted by a hidden member.
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    Mar 14, 2012 4:44 AM GMT
    No offense intended. I appreciate the help.

    I should have a lot of value in this place. According to my taxes, it's more than doubled in value since I bought it, although that probably isn't the best estimate.

    There are a few things I'd like to get fixed before I had it appraised too. This is when it starts to become a little too much to deal with right now.
  • Posted by a hidden member.
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    Mar 14, 2012 4:46 AM GMT
    Maybe Soundwave can answer some of your questions without you divulging sensitive info
  • Posted by a hidden member.
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    Mar 14, 2012 4:47 AM GMT
    DudeInNOVA said
    Captain_Awesome saidHow about remodeling your home? Watch enough HGtv and you'll get some ideas how to increase the worth of your house, then turn around and rent it out and buy another; and sell it after it's lost it's monetary value? I don't know the first thing about "Refinancing", but I know you should whatever it takes make a dime off of what you already got, to YOUR benefit ;) .


    I have ZERO remodeling skills. I guess I need to date someone who does. icon_confused.gif


    Sign up online for one of those shows to come to your house and do it all for you. Some of them do it for free, as long as they keep their show going.
  • Posted by a hidden member.
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    Mar 14, 2012 4:48 AM GMT
    Captain_Awesome saidSign up online for one of those shows to come to your house and do it all for you. Some of them do it for free, as long as they keep their show going.


    Ah hell nah! I don't want a bunch of people coming into my house with cameras! That would be creepy!
  • OptimusMatt

    Posts: 1124

    Mar 14, 2012 5:08 AM GMT
    Right now, half of America is under water - if you aren't, count your blessings.

    Because of the foreclosures an short sales going on the majority of Florida (for example) is more than 50% undervalued.

    Before you pay for an appraisal, check out zillow - if you're well below 80% ltv you're in a great position and you should be able to shorten your term substantially, BUT YOU DON'T HAVE TO RE-FI TO DROP THE MIP.
    Literally call your lender and ask them to review their AVM - it costs you nothing.
    The downside to a conventional re-FI is that they WILL increase your loan balance, but you bring nothing to the closing table. The streamline program "can" be done that way (Quicken loans, for example, does it like that) but is limited based on your original NOTE balance. The better way is the mortgage payment redirection (the way my company does it) - you redirect 2 payments to cover the cost of close and nothing but the MIP prepayment premium is added.

    Otherwise, if it's more than you want to deal with ATM, think about doing bi-weekly payments - you'll shave about 3-5 years off of your term.
    Also keep in mind that there's no pre-payment penalty under the FHA system - if you can swing an extra $100 on each mortgage payment it will be applied directly against your principal balance and will shave a couple of years off your mortgage as well, and you don't need to re-FI to do either of them.

    Again, best of luck =)
  • Posted by a hidden member.
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    Mar 14, 2012 5:31 AM GMT
    Thanks again for your help.

    It's not as bad here as it is in other parts of the country. I don't trust the government's estimate because people in my neighborhood can't seem to sell homes. I think some of them have taken them off the market and rented them instead. At the peak of the housing bubble, my home was estimated to be worth close to triple what I paid. Thank goodness it's come down from that because that was just ridiculous.

    This thread has given me a lot to think about.
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    Mar 14, 2012 5:40 AM GMT
    Years back we switched to bi-weekly payments (as mentioned above) in order to shave about 5 years off and saved a considerable amount of interest. IIRC our bank did this at no charge. YMMV, I'm not that astute on all this stuff, the partner is, and we're in Canada where you can't deduct your mortgage payments on income tax so whether that makes a dif I don't know. As well we could supplement each payment anytime directly against the principle, rather than just once a year. The two bi-weekly payments were greater than the single monthly payment but more of it goes against princple as well.
    Maybe Soundwave can chime in on the workings of bi-weekly payments as in the US scenario?
  • chgobuzz1

    Posts: 155

    Mar 14, 2012 5:45 AM GMT
    If I can help send me an email. I do this for a living. A thought is to have a local Realtor give you data on similar homes that have sold in your area over the last 3 - 6 months that are close to your type of house. Then you will have a good idea of what your home would appraise for. You should get a non-FHA loan so you will not need to pay their version of monthly mortgage insurance.

    Loans can be 30 , 25, 20, 15 or even 10 years in length. All these should have rates from 3% to 4%.