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Should I refinance if moving in a few years?

I've been looking into refinancing the house with interest rates so low. At first I was looking to see if we could drop our payments by a couple hundred dollars a month. I talked to our loan officer who helped us with our house and she said our payments would drop by $100 a month to refinance to our 30 year loan. Well, that doesn't seem worth it to me to start all over after making payments for 5 years just to save $100. So I asked her about a 15 year loan. Right now we make $935 a month payment on a 30 year fixed at 6.5%. $570 of that is interest, $140 is principle, and $225 is PMI, insurance and taxes. We took our loan out for $113,000 and have $105,800 left to pay. Over 30 years we will be paying $110,000 in interest. We could now refinance and get a 15 year fixed at 3.25% with a monthly payment of $1040 ($100 more than we pay now) The interest on that loan over 15 years would add up to $29,000. We only plan on living here for 3 or 4 more years. Should we refinance? Obviously my loan officer is encouraging it, saying it would be ridiculous not to, but I want an unbiased opinion by mattgl_638_260 from Farmington, Missouri. Jan 5th 2012 Reply


Chris Lockard (christopherlockard)
#17 ranked lender in Kansas - 9 contributions

There are two directions I would lean towards if I were you. The first, is that do not refinance at all and simply pay what you would on with a new 15 year note and allow that $100 to go directly to your principle balance. Because you have already been paying on your home for 5 years you will start to see(if you haven't already) more of your monthly payment of $935 go more and more to the principle and less to interest. So it would not make sense to look at a 30 year(in my opinion) if you are going to move in a few years. The other option is to go with the 15 year note at 3.25%. I am not trying to sound elementary; but you will obviously pay the new loan off twice as fast and while you will be paying mostly interest for the first year or two you should start to see a large portion going more and more to principle a lot faster. While you may think that the interest on the new 15 year note is a lot(~$28,863), keep in mind that if you continue to pay on your existing note(@6.5% you will pay over $144,125 in interest alone). The main focus if you know that you are going to be moving is to build as much equity as fast as possible in your home. The 15 year note is the best option from my perspective because in the event you do not move you will still be locked in at a very low interest rate and will have put yourself in a position to pay the least amount of interest on your home.Hope this helps. If you have any other questions on the specifics of your situation feel free to call or shoot me and email. ThanksChris LockardChristopherLockard@leader1.com913-227-4878NMLS: 236366 | KS: LO.0025778 | MO: 1623-MLO

Jan 5th 2012
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Dennis Sauerwein (stlmortgagerates)
#11 ranked lender in Missouri - 20 contributions

I tell all my clients to lock into savings while they can. I do annual reviews for all my clients to make sure they are paying the least amount of interest. My mortgage plan is part of an overall financial plan. Upon doing these annual reviews I can tell you life changes on a dime. Clients tell me I am here for the long term only to lose their job,illiness, divorce etc. Other clients say they will only be here 2 yrs and 10 yrs latter we are still discussing their options. I would suggest to do a no closing cost or a low closing cost option. If you really plan on moving I would refinance to 30 yr and take the $100 a month and put it into a 401k plan if you have one (cash is king). If you have an FHA loan it would be easier for someone to assume on a 30 yr. The problem for most people in this market is being stuck with a home they can't move.If you would like to discuss your options I can be reached at 314-703-7200 or stlmortgagerates@gmail.comThank You Dennis Sauerwein

Jan 5th 2012
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Harry Newell (harrynewell)
#27 ranked lender in Kansas - 17 contributions

My suggestion is not to go for the lowest rate since your intention is to only remain in your home for a few more years.You can lower your rate - but do a no closing cost refinance. You will benefit from the lower rate - but not increase your principal balance owed. Feel free to call me at 1-855-LENDER-411 (855-536-3374)Harry Newell

Jan 5th 2012
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Marlon Mitchell (mmitchell)
#6 ranked lender in Missouri - 52 contributions

I would say it's worth looking into if you can do a no closing cost loan, because if you can't recoup the money spent to do your refinance in the 3 to 4 years before you move it wouldn't be worth it. With that being said I also would look at your savings monthly that you get with a longer term since your not looking to own the home free and clear. Feel free to call me I'd be happy to discuss in more detail with you 816-759-0200 Kansas City MO.

Jan 5th 2012
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,728 contributions

Wow.. there's a lot going on here but let me tell you my prospective... When I put in the numbers, I come up with different amounts... but after looking at all the different scenarios, this is what i think will be best for you... If you do nothing... you dont refinance and you continue to make your same payment, and we fast forward 4 years which is when you think you might move, your payoff will be approximately $98K. If you refinance on a 15 year mortgage, My numbers say your payment will probably be lower, (i'm not sure if your current loan is FHA or Conventional), but in either case the apyment should be lower than your paying now. So if you refinance on a 15 year and we move forward 4 years, your payoff would be $82,500.. over $16K lower then if you did nothing.. it's absolutely worth refinancing on 15 years. My suggestion is to have your current loan officer put all the numbers in writing and contact another mortgage broker, not a bank, and have them quote you as well. WilliamAcres.com

Jan 5th 2012
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Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,016 contributions

YES, but maybe NO. If you are pretty sure you are going to be moving in 3-4 years, there really is only one way to know refinancing is the right thing to do. Have a loan officer take your mortgage information and do a "No Cost" refinance. Simply stated, a "No Cost" refinance is a loan where the borrower pulls no cost of the refinance out of their pocket or have them added to the new loan balance. The only expense the borrower needs to come up with is the appraisal. In this type of scenario, all of the costs of the refinance are paid for with a slightly higher interest rate. If the numbers show you save $50 per month, then that is a true $50. My best advice is to contact a local Mortgage Banker/Broker, rather than one of the big banks. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She will have access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you and guide you into the one that makes the best sense for your situation. Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter ~ The LoansA2z team of Nova Home Loans. www.LoansA2z.com ~ NMLS # 40586

Jan 6th 2012
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