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Refinance To A 20- Or 30-Year Mortgage?

Regarding HARP 2.0, or the Home Affordable Refinance Program, my wife and I are currently in our mid-50s with a grossly underwater mortgage. We did not qualify for a loan modification, so we are considering a refinance. Our 30-year mortgage is $213,000 at 5.875 percent, and we are entering our seventh year of payments. Given the historic lows on mortgage rates, would it benefit us to refinance now? I'm hesitant to start over on a 30-year mortgage given our ages. A 20-year mortgage would roughly keep our payments on par with our current ones, which we can handle now, but could be problematic later in retirement.The other issue is closing costs. I was under the impression these would be significantly reduced or eliminated for 20-year mortgages or less, yet the estimates we have received include them. Any insights would be appreciated. -- Jim Juncture

by jimj65_339_474 from Benton, Arkansas. Mar 19th 2012 Reply


James Barath (JamesBarath)
#9 ranked lender in Indiana - 351 contributions

As many have mentioned, you must first check to see if your existing home loan is eligible for HARP 2.0. Once you have determined that it is taking a 30 year amortization is the best option as you do head into retirement as it will allow you the flexibility of making a lower payment during the cash-short months and make additional payments as desired. You might be pleasantly surprised that taking the 30 year option and understanding the impact of extra principle reduction payments could accelerate the pay off of your mortgage faster than you thought imaginable. Good luck and Happy 1st Day of Spring.

Mar 20th 2012
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Jeff Cost (midwestlender)
#40 ranked lender in Ohio - 164 contributions

Hello Jim,For HARP refi you need to find out if the current mtg is owned by Freddie or Fannie. If you qualify I would definitely consider looking at a shorter term to avoid having a mortgage during retirement. Look at a 15 yr fixed as well. Closing costs may be rolled into the new loan but there are always closing cost associated with a mortgage. You either pay closing costs or take a higher rate in exchange for closing costs. ENG Lending, A Division of Bank of England, always puts your best interest first. We would appreciate the opportunity to serve you. Please visit us at www.cincinnatimortgagerate.net. You will soon find that we are so much more than a Mortgage Banker; we are a company that is dedicated to empowering our clients and referral partners. Don't forget to visit our Facebook Fanpage at http://www.facebook.com/pages/ENG-Lending-Cincinnati/171183536269710?sk=wall Or Call Anytime 513-403-6260

Mar 19th 2012
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Matt Schwartz (matts@txhomefinance.com)
#52 ranked lender in Texas - 3 contributions

Going to a shorter term would require an appraisal, if the house doesn't appraise then no shorter term. Best bet would be to qualify for a new 30 year term under the HARP 2.0 program to lower the rate and payment. If you were to make the same payment as if the refinance never happened that extra money would go to principal. Would have to have specific numbers in front of me, but my guess would be that the house would be paid off in roughly 18 years. Feel free to call me at the office if you'd like to discuss.Matt Schwartz214-866-0038

Mar 19th 2012
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Melvin List (melvinlist)
#143 ranked lender in Florida - 124 contributions

If you are concerned about retirement then I would look into the 30 year term but I would make the payments of a 20 year term (paying down the balance). This would give you the best of both worlds if you are committed. You pay more while you still have a larger income and pay less when you are in retirement.

Mar 19th 2012
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Scott McPherson (ScottMcPherson)
#552 ranked lender in California - 25 contributions

I would recommend a 30 yr. fixed rate mortgage but make a larger payment to have the loan paid off in 20 years. This way you have the flexibility of making a 30 yr. payment later when you retire or if your budget gets tight. However, you must be discliplined to make that larger payment every month. Perhaps you can set up automatic payment so you are not tempted to make the 30 yr. payment. Moreover,the pricing between a 30 yr. fixed and 20 yr. fixed are pretty much the same. The rates go down more when you get into the 15 yr. rates but the payments will obviously jump higher. If you are concerned with closing costs, you can structure your loan to have your lender credit absorb all lender fees. Many borrowers these days are taking a slightly higher interest rate to receive loans with little or no closing costs. If your rate is 5.875% now you should easily be able to lower your rate substantially and have a good portion of your closing costs paid out of the lender credit. This may sound a little confusing but I would ask your chosen local lender and they can better explain "lender credits" and "No Closing-Cost Loans" . Lastly there are some some eligibility requirements for Harp 2.0 contact your local lender and they should be able to walk you through this. Good Luck!

Mar 19th 2012
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Ralph Richard Guertin (ralph@absolutelowrates.com)
#1 ranked lender in Florida - 687 contributions

15 or 30 as most lenders don't give you a better rate for going down to a 20yr loan but the spread betwen 15 vs 30 is .5%. I would go with a 30 yr around 4 % give or take and pay one extra payment per yr to drop it to a 23 yr loan

Mar 19th 2012
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Joe Metzler (JoeMetzler)
#18 ranked lender in Minnesota - 3,727 contributions

Generally speaking, the bulk of most peoples "savings" in a refinance is from going backwards to a 30-year loan, not lowering the interest rate. The smartest move for everyone, is to get the shortest term possible in combination with their payment comfort level. Running any amortization schedule should freak most people out over home much interest they pay. The #1 reason people don't retire when they want to is because they still have a mortgage payment! Click my name to the left, select BLOGS, and look for the article "YourGage - Pick your customized loan term"

Mar 20th 2012
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Chris Brengelman (chrisbrengelman)
#47 ranked lender in Ohio - 28 contributions

Jim,How far is the home underwater? How much money would the quoted figures save you? How much are the costs? These are all things you have to put into consideration to decide if it is worth it. You will only be able to refi to a 30 year on that program, however I completely agree with paying extra to the mortgage if you wish. Cash is king nowadays and if you plan on staying in the house forever, I think the 30 year is the best option. There is no reason to strap yourself with a higher payment on a shorter term if you can't truly ENJOY the time you have in the house finanically.We have some other options available other then HARP if you are underwater. Feel free to call or email me for details! Hope this helps!

Mar 20th 2012
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