Financing in New York>Question Details

Alice, Home Owner in New York, NY

if your mortgage rate is 4.75%, is it worth refinance at 3.5% with 29 years left in the old mortgage?

Asked by Alice, New York, NY Tue Jul 10, 2012

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Hello Alice - The rule of thumb for me is: the fees for any loan should be paid off in the first 2 years of the mortgage, leaving 28 years of savings.

Since you did not state a mortgage amount I will use a loan amount of $300,000 to make my point. $300k @ 4.75%= Payment $1565
$300k @ 3.50%= Payment $1347
---------------------------------------------
SAVINGS MONTHLY = $218.00
SAVINGS 12 months = $2616.00
SAVINGS 24 MONTHS = $5232.00
SAVINGS 336 MONTHS (28 Years) = $73,248.

Using my formula above you will see that your bank fees should not exceed $5232 on a $300k loan, leaving you with a savings of $73,248 over 28 years. One of your larger bills might be the mortgage tax and you can reduce this significantly by doing a CEMA.

If you need any help achieving similar goals with your mortgage contact me anytime. No time is to early or late to discuss your business. SERVICE before COMMISSION 914-299-0420
1 vote Thank Flag Link Thu Sep 6, 2012
I would think with 29 years left if the "closing costs" are not that exorbitant it would pay but not knowing the principal owed makes it difficult to see the whole picture.
0 votes Thank Flag Link Fri Oct 4, 2013
Are you in a co-op, condo or single family? Co-op refinance costs are lower, and the mortgage tax assingment is not an issue, however you must obtain your original stock and lease from your current lender. As far as saving goes, it is worth it if it is an amount that makes a difference to you, Some will do it to save $100 per month, others don't want to do it if it saves them $300. In my mind, the sooner you refinance after you take a loan out, the better the saving is too you because you are starting the clock ticking again after a shorter time.
0 votes Thank Flag Link Thu Jul 26, 2012
Alice,
If you go to a knowledgeable mortgage originator when you refi, then you will not have to pay the mortgage tax again (1.8%) or full title. With this in mind you can see if it is worth refinancing.
0 votes Thank Flag Link Fri Jul 13, 2012
That depends on your credit you may get lower,
0 votes Thank Flag Link Thu Jul 12, 2012
try the mortgage calculator, that will help.
0 votes Thank Flag Link Thu Jul 12, 2012
A drop from 4.75% to 3.5% on a 200K mortgage would result in a $143.20 per month savings. That equates to a 14% drop. If there was a 3 year break even that would be worth it by most standards if you plan on keeping the house even for 5 more years. A 3 year break even would allow them to spend $5155.20 on a refinance to get the 3.5% rate. Based on current rates, 3.5% would not cost nearly $5155.20 to get, even with a less than average credit score.
0 votes Thank Flag Link Tue Jul 10, 2012
I was always told the rule of thumb by mortgage specialists that not to refinance for less than 2 percentage points. You have to do the math and take into consideration what expense you will incure (closing costs, appraisal fee) to refinance, and how many years it will take to break even before you can benefit from the savings. Look at the big picture, and only you can answer that question not us.
0 votes Thank Flag Link Tue Jul 10, 2012
Hi Alice, in a nut shell, how much will it cost you to refi? how much is your loan ? how much do you pay a month? if you refi- how much will be your payment ? how much of a difference will it be a month? divide that into how much it will cost to refi...probably you will be ahead of the game maybe 3-4 years from now. Are you planning on being there for some time?Hard to say without any amounts. Terry K 718-614-3167 or email TKorahais@elliman.com
0 votes Thank Flag Link Tue Jul 10, 2012
The answer is an absolute yes.

I have no idea how anyone could say "no". One year into a 30 year and you can drop your rate by 1.25% is a huge savings. If you are worried about adding an extra year then you can "self-amortize" the new loan at 3.5% over 29 years.

You should absolutely refinance. Note that I do not lend in NY so it's not a ploy for your business, it's simply an answer to your question and there is no question that the answer is YES!
0 votes Thank Flag Link Tue Jul 10, 2012
My gut feeling is no, but there are many things to consider and many facts to look at based on facts you didn't provide. In a nutshell, if you are planning on refinancing back to a 30 year note with a lower interest rate, you will probably lower you payment several dollars a month, but the upfront closing costs could be thousands and the long term interest paid will likely increase.

Things to look at are residence goals - are you planning to move in the next 1-5 years or do you plan to stay in the home for quite awhile? Are you looking to refinance for another 30 years or are you looking to refinance for a 15 or 20 year note? Are you looking to refinance for cash out or just for loan balance.....or even with a payment to decrease current amount?

When you figure your payments based on year of note and amount financed (you can use any Internet calculator program for monthly payments), look at the difference and then determine the change in total interest paid and compare to your long term goals of occupancy. Good Luck.


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0 votes Thank Flag Link Tue Jul 10, 2012
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