What would you do? -On Refinance

iVillage Member
Registered: 10-01-2008
What would you do? -On Refinance
7
Tue, 07-09-2013 - 4:36pm

The new terms on refinancing the house would be as follows:  

20 yrs. @ 5.175% Payments including Insurance & Taxes = $988.00 

Current loan:  

24 yrs. 6 mos. left @ 6.875 Payment including Insurance & Taxes = $1013.00 

FEES:  

$350 - $500 for a new appraisal - must appraise for UNDER $155,000

$400 for Attorney to send to Bankruptcy court for there (almost 100% guaranteed) approval to lower rate.  AND, we MAY have to pay the difference of $25 a month to the BK Trustee....not for sure...but no big deal since we only pay through next February and it will take a month of two to get this settled.

A $25 a month savings is not much...BUT  and a BIG BUT.......it will knock almost 5 yrs. of payments off.  I'll loose one whole payment in fees, but still seems worth it to me.  This IS staying with the same lender and under the HARP program backed by the government because our loan was a Freddie Mac loan and the loan was made when the housing market was at it's peak.

I know any move on the part of a mortgage SINKS.  The paper work is horrible and it requires getting the Bankruptcy court involved.  And getting hubby to get off work to sign everything.  

Worth it????  At first I said no......but the more I think of it....YES?????

iVillage Member
Registered: 07-24-2001
Tue, 07-09-2013 - 5:36pm

I think when refinacing, most people just do the math for how much the refi costs divided by the monthly mortgage payment savings, to find out how long it will take to break even, and if you are planning to stay in the house longer than this "break even" point it makes sense to refi.

So, in your case, the cost to refi is $900 - $1,000 (which is $500 appraisal + $400 atty fees + (possible) $100ish (for the months you would need to pay $25 mnthly until Feb).

So $900 cost to refi divided by $25/mnthy mortgage payement savings = 36 months before you see yourself breaking even on the cost to refi.  

And if you are planning to be in the house for three or more years than it makes perfect sense to refi.

Still, there are a couple of questions (I'm sure you've considered . . . but worth asking anyway) . ..

- Do you know if there is any penality for the prepayment of your current loan?

- Are you sure you accounted for all the closing costs of a new loan?

Also, since a big portion of your refi costs are associated with the bankrupcy, and you will be out of bankrupcy soon, I wonder if it makes sense to wait until these costs are no longer part of the picture (though you have to consider that the interest rates may climb).

We recently did a refi and the paperwork was really no issue at all for us.  It was painless, and our bank accomodated H's busy travel schedule without any problem.

I wish you luck.  $25 monthly savings doesn't seem like a big deal, but it looks like it will add up to nearly $6,450 in savings over the long run AND that is a BIG deal.

iVillage Member
Registered: 04-08-2008
Wed, 07-10-2013 - 1:40am
This is where things in Canada seem to differ. If I want to pay my mortgage off faster I can just add money to the principle. I don't need to refinance to do it. We can add up to 18% of the original principal amount per year without penalty. Seems like such a hassle for $25/month but if that is the only way to pay it off faster, then I guess it is worth it! Do what you feel is right in your gut. Good luck. Dee
iVillage Member
Registered: 11-14-2008
Wed, 07-10-2013 - 10:05am

Oh yes this will be worth it. Do it for sure. I too wondered if you waited until March when all is said and done if you could save on the court fees but really that is a drop in the bucket.

And don't forget it is $25 a month but all the Interest this saves you and that is why it knocks years off. 

Completely worth it.

Avatar for mahopac
iVillage Member
Registered: 07-24-1997
Wed, 07-10-2013 - 10:13am

I would do it.  I *did* do it.  It was a nightmare of paperwork and objections (I'm self-employed, I still had a $44K HELOC - paid off five years ago but still open - that I refused to give up, blah blah blah) but it cut several years off my repayment and saves $80K over the life of the mortgage, so I stuck it out.  Well worth it.  By the time I retire, the house will be completely paid off.  It made sense not just for the $80K but for not having to pay into retirement.

iVillage Member
Registered: 10-01-2008
Wed, 07-10-2013 - 1:08pm

We ARE refinancing!!!  (May GOD have mercy on my sole....and patience...and nerves...seriously) 

We are doing it for the almost 5 years of savings, not the $25 a month.  Heck, we'll more than likely pay what we were paying before or a little more.

I wish I could wait until March to refinance, but mortgage rates are climbing.  If I had done this a month earlier I could have saved another whole percent....maybe.  I just feel lucky that we can do it at all since we are in Chapter 13 and not completely out until March.

I'm seriously trying to tell myself that this is nothing and not get all hyped up about the procedure but since I'm in my early 50's.....I don't take stressful things as easy as I use to.....hummmmmmmmmmm

LOL

LIFE IS GOOD!

Community Leader
Registered: 08-25-2006
Thu, 07-11-2013 - 1:32pm

Late to the party, but wanted to wish you luck.  I hate the headache of stuff like this.  But 5 years off of your loan is huge! 

So, touching on some one else's comments, can consumers in Canada not put payments directly towards the principal of a home loan? 

 

Serenity
iVillage Member
Registered: 10-01-2008
Thu, 07-11-2013 - 3:03pm

I know we can add any amount extra we want to and apply it straight to the prinicpal.  I always include a little extra.