I am interested in hearing educated opinions about general refinancing guidelines and best practices.
I bought a house in San Francisco, CA in Nov of 2006 with a 30-year fixed first mortgage (6.375% - 10 yr interest only option) and a second (7.375% - balloon due in 15yrs). With current rates hovering around 5% on conforming loans I am now interested in refinancing. Today I received a good faith estimate - paying 1 point - for a rate of 5.5% - getting to a break-even point in about 16 months. I plan on staying in the house for at least another 5 years. Are there general rule of thumb guidelines as to a desirable break-even point when refinancing?
Johann,
I posted a blog here on Trulia called "The Rules of Refinancing." Check this out, and let me know if you think I can help. I am local and can certainly address your specific questions about determining the financial break points for making a refinance worthwhile.
Thank you!
Rob Spinosa
rspinosa@mortgagemasterinc.com
Johann,
If you plan on staying five years and you're break even is 16 months it seems like a no brainer to me. However, you may be able to get a better rate. We are in the process of refinancing our home and just locked in a rate of 4.875% with no points on a 30 yr fixed. I think you should shop around some on rates. If you want some recommendations let me know.
Regards,
Lance King/Managing Broker
415.722.5549
lance@fixedrateproperties.com
Johann,
When you are presented with an option to buy down interest rates all you need do is exactly what you've done. Project when you break even and knowing how long you plan on staying in the property calculate your savings over that period of time.
One other factor can come into the equation for some is the tax benefit in the year that you pay the point. That can make adifference if the other numbers are close.
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