Does my new rate have to be at least 2 points lower?

Asked by Lookingatseattle, Seattle, WA Mon Apr 29, 2013

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Rhonda Porter, , Seattle, WA
Mon Apr 29, 2013
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I'm assuming you're considering a refinance? Your new rate does not have to be two points lower. If you're refinancing with the same term/program, consider what the net closing cost are and the difference in the payment. Use an amortization schedule to see how long it will take for you to return to your current principle balance - if you're going to retain the mortgage for at least that period of time, it may make sense to refinance.

Other considerations are if you're able to drop pmi, if you're refinancing from an ARM to a fixed period or to a mortgage with a shorter term.
0 votes
Dave Skow, Mortgage Broker Or Lender, Seattle, WA
Wed May 15, 2013
No .....if refinancing.. divide your refinance costs by the monthly savings you will acheive ..this gives you your " breakeven point " as to when you will be " ahead of the curve and saving money ....

most refinances happen with the rate drop being significantly less than 2%
0 votes
Ardell Della…, Agent, Kirkland, WA
Tue Apr 30, 2013
The old school rule of thumb has always been a 1% difference. Be sure to include out of pocket AND FINANCED costs when determining the break even. In many cases there is justification for less than 1% difference. Often people make the mistake of viewing financed costs as NO cost, so pay attention to that aspect.

Other than that this from Rhonda bears repeating:

"Other considerations are if you're able to drop pmi, if you're refinancing from an ARM to a fixed period or to a mortgage with a shorter term."
0 votes
Ray Akers, Agent, Seattle, WA
Mon Apr 29, 2013
No, the new loan doesn't have to be at least 2 points lower. The cost of your refinance is spread out over the length of your loan. If you're planning to sell your home in a couple of years, then you probably shouldn't spend the money to refinance your mortgage. On the other hand, if you plan to stay in your home for the next 20 years, then run don't walk to your nearest lender to take advantage of today's record-low interest rates.
0 votes
Ron Thomas, Agent, Fresno, CA
Mon Apr 29, 2013
If you GOOGLE; "mortgage calculator" you can find a few.
Play with it, plugging different combinations.
The only thing you don't know is the Lender and Escrow fees, and you can find them.

Good luck and may God bless
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