Should I Refinance?

Updated on February 09, 2009
T.B. asks from Pittsburg, CA
49 answers

I purchased my home 6 yrs ago at a fixed rate of 6.375% for 30 yrs. My financial advisor is advising that I refinance at a new fixed rate of 5% for 30 yrs and include my car which i purchased a year ago. I currently owe $218,000 for my house and $23,000 for my car. I have no other debts. My advisor is trying to convince me that it's good to have debt and that no one pays off their home anymore. Would it really be worth it to refinance? With the closing costs amounting to around $10,000, I will be owing more than I already do. Yes, I will be saving a couple of hundred dollars a month but is it really worth it? Any advice you have would be greatly appreciated. Thanks moms!!!

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So What Happened?

Thank you to all that responded. I have decided not to refinance at this time. Some have stated that the Feds are considering lowering the rates again so I will wait. I will, however, not use my adviser's people. 10k is extremely high and is what prompted me to ask my question. My goal was to save money and pay my house off sooner with the money I would have saved. My parents are 73 years old and still have a 25 year mortgage on a house they purchased in 1976. I do not want to be in the same predicament 30 years from now. I am trying to learn from their mistakes and live comfortably within my means. As for the car, we will not be including it when we decide to refinance. The interest is only 4.9% and I have been paying more than the minimum every month. Thank you all again especially to those who suggested some referrals. I plan on calling a few of them.

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E.H.

answers from San Francisco on

It doesn't sound like a good deal to me. I have a friend who's looking into refinancing and she's found much lower points and closing costs than $10,000.
This doesn't sound like a deal at all.

E., mom to 9 and 7 year old daughters, business owner...busy!

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G.B.

answers from San Francisco on

I dunno T., but what I think is that the whole financial crisis is not over yet. The commercial sector will be the next real estate to fall, I bet sometime this year. We are still in for more screaming.....

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J.S.

answers from San Francisco on

Hi Teresa,
I know you've already received a lot of responses, but I just wanted to say a couple of things. I was a real estate agent for 12 years and $10,000 in closing costs seems WAY too high. I would expect them to be less than half that. Before you do anything you need to find a good loan agent. If you belong to a credit union that is a good place to start, but always speak to at least three before deciding. My favorite agent is in San Jose if you'd like a recommendation. You are really looking for someone that can keep your best interests above their greed for extra commissions. They do exist!

If your car loan is a fairly high interest rate it may be a good move to roll it into your mortgage since not only will the interest be lower, but it would also be tax deductible.

Once you know exactly how much extra debt you'd incur by refinancing (credit check, points, appraisal, etc.), divide that number by how much you will be saving in monthly payments.(this does not include the tax savings, but it is a good indicator, and the tax savings become a welcome bonus at tax time!) This bit of easy math will give you a good idea of how long it will take you to 'get ahead' on the refinance. Will you be in the house that long? If you are planning to stay put for a good long time, this may all be worth it.

One last note... my DH & I are well below retirement age, own more than one house and we have no mortgages, so the idea that 'no one pays off their home anymore' is cleary untrue!

So I'm adding to this since I just noticed a response that mentioned 15 year mortgages. Something to consider about that. Typically a 15 year mortgage has a higher payment that you would be locked into. You can always pay off your 30 year early either by paying a large amount when you've saved it or by making larger monthy payments than are required. In times when jobs are not as stable as they once seemed, it may not be a good idea to lock yourself into a higher monthly payment than necessary. Just because a mortgage holder LETS you spread payments out for 30 years doesn't mean you HAVE TO take 30 years to pay. When you have more, pay extra, but on lean months or when you are spending more than usual (holiday time, summer vactions, etc.) you can pay the lower fixed amount.

Ok, I'm really done now! :o)

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D.P.

answers from Sacramento on

Maybe if you really need the extra couple hundred a month and it isn't true no one pays off thier homes, my parents did, and most of us would if we could! Is this someone you have worked with in the past and truly trust or is it someone in need of business because of the sluggish economy?? ANother thing is your home worth what you owe right now, alot of people are upside down with their home loans right now. I would seriously do some research and go with your gut. We NEEDED to refinance now and couldn't because all of a sudden we owed more thatn the value of the home. Good luck with your decision!!

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L.O.

answers from San Francisco on

We have refinanced many times over the 15 years we've owned our home. I have never seen closing costs of nearly 10K! Find another finance company that won't gouge you for the closing costs, and see where it gets you. 10K is simply outrageous!

Good luck!

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J.H.

answers from San Francisco on

Hi T.,
Good for you to ask questions! My husband & I bought our first house this past July w/ a 30 yr. fixed loan ($350K) at 6.25%. We refinanced in Dec. at 5.75% for $500 (including everything). The original refi was going to be at 6% with no closing costs. He called us a few weeks before closing and said he found the same loan for 5.75% at $500. When we did the math, it would only take us 4-5 months to recoup that $500. That was a no brainer for us as we'll be in this house for a few yrs. You need to figure out how long it will take for you to recoup your costs. As far as being able to write off the interest, well that is a biggie. Your tax accountant should be able to explain that to you. Please feel free to get in touch w/ me if you'd like my broker's contact info. We interviewed 3 brokers and one Well's Fargo loan officer and I am SO GLAD we went with Brent, our broker. He's very on top of it. Good luck!

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B.R.

answers from Sacramento on

I don't feel adequate when it comes to these big financing questions, and would advise that you get other opinions from people who know about finance options. However, I do have reservations about any financial advisor who says debt is good and no one pays off their houses any more. It's apparently true that a lot of people don't even plan to pay off their houses when they purchase them, but is that really a good reason for you to think that way too? Just look at the economic problems this country is in right now, and what brought us into them. From everything I'm hearing on the subject, it seems this is just the type of thinking, pushed by overzealous, less than ethical, financial people that has brought us into a mess that has affected not only the people who followed the bad financial advice, but all of us.
I see you saying it would cost less per month, but overall would put you into more debt. That sounds like a bit red stop sign to me. If monthly payments are hard to meet and the several hundred less in payments is the important reason to possibly re-finance, you can look carefully at your budget and probably trim enough 'frills' to make that work. Look up Dave Ramsey's Financial Freedom University on the web. He is a financial advisor that I believe has some really down to earth ideas.

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C.M.

answers from Chico on

Good advice here, but thought I would throw in another pro for paying off the car...your insurance costs should be lower too.

I would NEVER pay $10k in closing though...find a new broker!!

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D.A.

answers from San Francisco on

I've been a Realtor for 40 years, and have seen all the scenarios you can name. One of the crucial things you need to think about before refinancing is "how long do you expect to continue to live in the house?"

If you expect to live there for at least five years, it might make sense. If you plan to sell sooner, it probbly wouldn't.

Your financial advisor is mistaken when he says that no one pays off their home any more. I work with people regularly who are making every effort to pay off their homes----and when they do, it is a new day for them!!! All those former mortgage payments can be put to new use. In some cases, it's buying another property to have as a rental. In other cases, it's investing more money into whatever retirement plan they have access to. In every case with which I have experience, the people who have paid off their houses have a much more secure retirement plan, and have fewer worries.

If you decide to refinance, check on several things:
Does the new loan have a prepayment penalty? If so, that could be a $$$ problem if you have to sell during the prepayment penalty time.

Make absolutely certain that the new loan amount will not be more than the house is worth now. If it is, and you should have to sell, you'll lose a bundle. The appreciation rate for houses is not expected to begin again for another 3 or 4 years, and in the meantime, values will go down for a while longer---particularly if you live in an area where there are a lot of short sales or foreclosures. There are lots of things to consider---not just the $$$ amount of your current mortgage payment, but also the potential situations if you refinance now. It can be a good thing, but not always.

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S.B.

answers from Redding on

Dear T.,
My friend has refinanced her house several times.
I don't know all her specific details, but she uses an independent mortgage broker. I know for a fact she never had closing costs anywhere NEAR $10k.
Since the market has taken such a turn, you can actually benefit by having your home reappraised because if it's most likely worth less than when you purchased it, especially if you bought when the market was high.
If your home is appraised at a lower amount, you can request an adjustment on your property taxes. In fact, my friend is in the process of doing all that right now. I would talk to several different professionals before making your decision.

Best wishes!

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M.S.

answers from Sacramento on

If you are not having a problem with your current debt, there is no reason to refinance. I think your advisor is trying to make money because it makes no sense to re-finance the house and pay them $10,000 to do it. I think you should trust yourself, and yes, people do pay off their houses. If you want to be financially free when you are nearing retirement, stick with what you have. It feels slimy to me.

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S.C.

answers from San Francisco on

Don't do it. If you want to refinance get someone with no
closing costs and refinance for 15 years. Don't put your
car in the loan. You will be paying for it for 30 years!!!
Be smart, it is better to pay off your home loan as soon as
you can. Your advisor is incorrect!

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C.T.

answers from Sacramento on

I'm no expert but here is something to think about. Do you still want to be maying a mortgage when you are retired? My parents figured out how to have their house payments end right as they were retiring. This was fantastic becuase as their monthly income reduced from not working so did their monthly expenses. Just a thought. Yes you get tax benefits now for having a house payment but think long term not just short term. It is thinking short term that has got the country into its current mess!

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G.T.

answers from San Francisco on

Hi T.,

If you can afford the payments as you have them now, then don't refinance. Not only will you owe more than you do now on the principle but over time you will owe more in interest. Your loan resets to 30 years. Right now your current loan has only 24 years left on it. I think it's worth refinancing if (1) you don't have to pay any closing costs, (2) the rate is 1 point or less than you pay now...even so if you follow those guidelines your loan resets to 30 years again so if you refinance and can afford to pay more in monthly payments, do it so you don't pay more in interest over time. Wells Fargo recently quoted me a refinance with no closing costs (my current loan is with them). So it's possible to not pay any closing costs. Oh and I don't buy the belief that it's good to have debt. I've taken debt reduction classes and when you calculate all the interest out (even after tax deductions), you are far better off without debt.

Best of luck!

G. Thomas
www.advertisingspark.com
Smart Strategies for Start Ups on a Small Budget
Please vote for me at: http://www.startupnation.com/leading-moms-2009/contestant...

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J.M.

answers from Fresno on

Hi,
you would have your car paid off and your house payment would be lower. after about 3 years you would break even on the cost of the refinance and then it would be profit. so i think if you plan to stay in your house for more then 5 years it sounds like a good idea. Some people are not able to refinance because they owe more then the house is worth.

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V.R.

answers from Redding on

If you save a couple of hundred dollars a month, in 30 years, you'd save over 70,000 dollars.

The only thing I'd be concerned about is if you plan to sell or if your job is not secure and you get upside down in your house.

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H.M.

answers from San Francisco on

Another idea is look into refi with a 15year fixed. Might be very close to what you are paying monthly now but in the long run you much less interest. Maybe shop for another mortgage broker, shop around for loans. We have similar mortgage to you and more, we have refi-ed in the past, never $10000 in closing costs, it was $800. Also if you put your car on it, you will paying for your car for 30 years, if you don't have a problems paying now, I wouldn't add your car. Good Luck

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J.D.

answers from San Francisco on

My suggestion and what has always worked best for me - go straight to the bank without paying the middle man. You can also negotiate fees and the rate with the bank. Start with the bank where you have your current loan.

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J.K.

answers from Fresno on

The interest rate bring lower would be good but I wouldn't add the car in because you would be paying a huge sum for that car with 5% for 30 yrs. I would add in the closing costs to the loan which should be alot less than 10,000 and cut it to a 25 yr loan so you don't lose the years you have already been paying on it. Make sure you are not refinancing more than the house is worth.

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K.R.

answers from Sacramento on

Hi T.- I have been in mortage for over 7 years and my advice is to go to a credit union or a bank. You can negotiate those fees and should be able to get the loan done for 3-5K max including your title fees. Your new loan would be 218K plus the 23K which will put you at 241K plus the 10K in fees (Then you are at 251K). It sounds like they are charging you much more than the typical 1% on the loan and you may be able to get it done at .5 % in fees in this market. At 1% on a loan of 241K your broker fee would be 2,410.00 if they were just charging you 1%. You also want to see if your car rate is higher than the 5%. If it is not I would not include it in. On average it takes a year to recoup your fees. I think it is a good thing to do if you are staying in your home for 3 years or more. I am happy to help you if you need more details. K. :)

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A.M.

answers from Sacramento on

You are lucky in this economy to have enough equity to be able to refinance! But seriously, given your scenario, I don't think I'd do it. You have to look at how long it is going to take to re-coup those closing costs... which are incredibly high! I'm not a fan of paying off cars with equity. Realize that you will be paying off that car loan for the next 30 years, long after you will have gotten rid of the car. Based on what you have said, it seems like your "financial adviser" is more in his/her interest than yours. I'd say go see someone else and get another opinion, shop around for rates and closing costs. 10,000 in closing costs are way too high for a 200K loan.

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L.D.

answers from Modesto on

Now is a good time to refinance for the lower interest rate but closing costs should NOT be that high. Shop around for or maybe use a mortgage broker to find the best rates and closing costs. DO NOT INCLUDE YOUR CAR. All you are doing is taking your (presumably)5 year loan (with 5 years of interest) that would be paid off in 5 years and turning it into a 30 year loan with 30 years of interest. Are you really going to have your car for 30 years? If you replace your current car with another car in let's say 10, or even 20 years, you are still paying on your current car because it's rolled into your home loan. Then you will be paying on two cars -one you don't own anymore and pay on through your 30 year home loan, and your newer car. It's never wise to pay off your car with your home loan - you will pay way more interest on it over 30 years than you ever would with a regular car loan. In the end the car will have cost you over twice as much. Hope I explained it well enough. Good luck whatever you do!

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K.F.

answers from Salinas on

Hi- I didn't read all the responses but here's my two cents...The decision is really pretty easy. Just figure out exactly how much you will save per month then estimate how long you will be staying in this home. As soon as you figure out how long it will take to pay for the loan then you'll know when that extra money you save each month is really free and clear. If it's $200-$300 per month then imagine after 10-15 years how much you'll save. The two things you should be aware of are $10k to refinance a $218K loan is way too high. We just did a $275K refinance for under $6K. It should be about 2% of the total loan. Also, if you take money out to pay off the car realize you will owe on the car for the life of the loan. 30 years is a long time to pay for a car that will be long gone by then, even at a low interest rate. If you plan on keeping the car for a long time and really need to reduce your monthly expenses then maybe it's a good idea but if you can afford it you may want to keep your current auto loan or pay off that part of your loan more quickly by making extra payments on the principal each month. Hope this helps, good luck!

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D.S.

answers from San Francisco on

Don't do it. Sure refinance to get the lower interest rate, but don't include your car in it. That's just a way for him to make more money because your loan is bigger. The way things are now, just keep everything separate. It's better that way.

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K.H.

answers from San Francisco on

Hi T..

As a Realtor and a Loan Agent, I would ask you to answer the following:
* Is the 10k coming out of your pocket, or added to your loan? If added to your loan: (1) You are most likely paying the agent -at least- one point in commission. This is in addition to what the lender is paying...Without seeing the cost breakdowns to confirm, I'd say you are paying HIGH closing costs that s/b reviewed. (2) 10,000. over the life of the loan is A LOT, no matter whether or not you are planning on keeping your home. (Quite honestly, this seems like a lame excuse for fees from your agent.)
* If the 10k is coming out of your pocket (or any portion of it: Consider how much you are saving on a monthly basis,(a sum of the reduction of your mortgage and your car payment) let's call that 200., and how long it will be before you actually regain that up front cost = 50 months. This means it will take you over 4 years before you actually -save- money.
Saving money on a monthly basis is a really cool thing to do, of course. However, amortizing your car loan over 30 years may not be your best bet - depending on the time you are planning to keep your home. Keep this timeframe in mind as the equity in your home will be $23k less if you pay it off at closing. AND, the cost (interest rate) for a 'cash-out refinance is most likely higher than without it.
Bottom-line/s IF you are sure you will sell your home in 5 years or less, and if you are not paying the agent a sum of not more than 1% in commission (this includes what the lender is paying your agent, as the more the lender pays the higher the interest rate, plus what you are paying the agent via closing costs), and if you are certain that when you sell your home the equity remaining will be sufficient to pay closing costs, agent commissions, plus your next home's down payment and closing costs -- THEN I would recommend you move forward.
I know it's kinda complicated. (And, there are smaller factors not mentioned as well as details unknown to me.) If you would like more information, please do not hesitate to ask me, T.. ZERO obligation. 'Just trying to help. :)
K.
###-###-####

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T.H.

answers from Chico on

you should get the advice of a finance expert that is not positioned to gain a commission if you choose this option. it is hard to get an unbiased opinion from someone who stands to gain. i would hesitate, because i can't do the math and don't have the finance info on your car. if your car is at a higher rate, there are some situations that consolidation might be better for, but i would ask another expert if i were you...

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V.P.

answers from San Francisco on

Hi T.,
I'm not an expert, but I follow the rule of: If I can re-coop the cost of the new loan (10K closing costs) within a year, then it's a good deal. If not , then you may want to hold out for a better rate or lower closing costs. I was recently quoted 4.9% on a 30 yr. fixed with closing costs of only 5K.
Calculate the cost of your current interest rate for one year. In your case you will need to calculate the cost of the interest on the car loan as well. I hope this is helpful.
Good Luck,
Vp

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J.W.

answers from San Francisco on

I can't tell you yes or no on that issue. What I will tell you is that our financial advisor has always issued us the same advice and it has done well for us. We were able to write off all the interest on our taxes which was a HUGE benefit during tax time. I feel like we will have a house payment for the rest of our lives and that's just one of those things that I think we will just have to learn to live with. I think the mentality of "getting your house paid off" is something that our parents' generation had and passed on to us because of the Great Depression. Hope that helps a little.

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J.M.

answers from San Francisco on

Hi T.,

We refinanced this week. We went from 5.375 to 4.5. Our closing costs were $5,721. That includes my final property tax payment for this year and a year of my home owner's insurance. $10,000 seems a bit much.

Someday our house will be paid off.

Our car is not included in our mortgage. I'm not going to own it for 30 years, why should I pay for it for 30 years?

I suggest you contact your current lender and see about refinancing with them. Some banks do this at no cost, some are low cost. Even saving only 200 a month really adds up over 30 years. ($200 X 12 X 30 = $72,000)

Good luck.

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A.W.

answers from San Francisco on

I was in the mortgage business for 7 years, and my fiance still is. I'll keep my answer short. The closing costs are too high. I think its a good idea to wrap your car into the loan if the interest rate on the mortgage is less than the auto loan, AND, if the savings over time will happen long before you ever leave/sell the house if that's in the plan. Additionally, the mortgage interest is tax deductible. Lastly, I disagree with your advisor, paying off a loan of $218,000 is possible and could be a great nest egg for you or your children!
Good luck!
A.

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M.F.

answers from Stockton on

There are many questions here that you have to look at. Will you be staying in your home? Will you be selling your car and getting a new one in the next 5-10 years? What is your house worth? The reason I bring these up is because we made this mistake. We refinced our home and included both of our cars. We were told to do this because you can save money for one and also write the interest off on your taxes. Our problem was, we sold our house a year and a half later and also got new cars and now have payments again. So pretty much what I am saying is, if you plan on staying in your home and keeping your car for the next 10+years then yes, it would be a great idea.

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T.M.

answers from Sacramento on

Hi T.,

I have fallen into the pit of refinance...and I would suggest you hang tough with your current beliefs...I would work to get the car paid off...Excel has an loan template that allows you to see when you could pay stuff off and how much interest you would save...if you put $100 a month extra on the principal of the loan for the car/house you can shave so much off the interest paid to the company...you need to make the additional payment in a seperate transaction so that it comes off the principal...These are spooky times...I would hang tight with the debt you have...and not incur more...

My heart to yours,
T.

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L.A.

answers from San Francisco on

I suggest you contact Marge Nogosek, owner and President of Cedar Mortgage. Her direct information is: ###-###-#### Ext. 128; 3190 S. Bascom Avenue, Suite 100, San Jose, CA 95124; [email protected]____.com. Marge is extremely knowledgeable and ethical. She'll be able to assess your situation and discuss your options and how they'll affect you financially. Since she is a mortgage banker, she also has access to more refinancing options than a broker does. She will not try to sell you a bill of goods simply to make a commission, but she will be able to help you make an informed decision about refinancing your home.
Good Luck, L.

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A.T.

answers from Stockton on

You can't deduct the interest on your auto loan from your taxes but if it's added to your home loan you can. The 1.375% you save in interest will make up for the closing costs in the long run. If you pay off your house, then you lose the tax deduction on the interest. You could put the extra money away for retirement or a really fabulous world tour or a second investment property. I'm assuming you have a college fund set up for your daughter...
According to my math - which is off a little because I don't have the % on your auto loan or term - you'll save approx. $23,000 in interest over the life of the new loan which after deducting your closing cost of $10,000 is $13,000.

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M.E.

answers from San Francisco on

I think that your financial advisor is saying that if you wrap your car loan into your house loan that you can deduct the interest whereas if it's a traditional car loan you can't. However, the following statement "no one pays off their house anymore" is brainless. Our goal is to pay off our house. You should be going to a mortgage broker to refi not your financial advisor. We are waiting for rates to go lower and want to refi our home and hopefully get a 15 year not a 30. To me, that is the biggest drawback - you are in year 6 of a 30 year loan and you refi and you're back to 30 years. I'd like to recommend our mortgage broker Jeff Simonich of BWC Mortgage Services ###-###-####. He's very reputable, trustworthy and honest. Good-luck.

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S.E.

answers from San Francisco on

Denise made many great points.If your short view is, look at the long view, which you seem happy with at the moment.

Remember brokers and refinance people make money when you refinance, so it is in their best interest to get you to refi.

Stephanie

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P.R.

answers from San Francisco on

Hi T.

We are in the middle of refinancing now too.

Yes a lower interest rate over several years will be better than paying 6.5%.

Your closing costs at $10k are way too much to get the lower interest rate. By using abroker you are paying too much.

If you go directly to the lender you will get a better deal. We have niow sigend with HSBC which is now offering 4.875% "Community works" 30-yr program for $350 fee. The low fee community works may only be available for another week. See the site www.hsbcusa.com , and view mortage rates.

The HSBC rep we dealt with is Tamie T Pham, Retail Mortgage Lending Consultant, HSBC Mortgage Corporation (USA), 39410 Fremont Blvd., Fremont, CA 94538,

Phone. ###-###-####, Fax.###-###-####, Cell ###-###-####
Email. [email protected]____.com

I can't comment on the tax treatment of your car though.

If you sign up for the lowest interest rate you can get, then you can make twice a month payment (instead of one) that will help reduce he amount you owe. Increasing your monthly payments is an option if you can afford it, and it pays your house off sooner, and you spend less over the life of the loan. Hence you can treat a 30yr motgage as a 15 yr mortage if you decrease the time between payments and increase your monthly payments (even by $10 makes a difference).

Regards
P., Santa Clara

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G.D.

answers from Modesto on

Just make sure that they re-apraise your home, because the value has gone down and so should your debt!!!

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L.C.

answers from San Francisco on

Hi T.,

Fist I want to say congratulations - you have managed your credit very wisely. You should be proud of yourself. I have worked in the mortgage business for 14 years. It is very refreshing when you come upon those who know how to manage their money. With that being said, I would say YES to the refinance. Here are my reasons: One your car payment, unless you drive a Rolls Royce then the equity in your car is worth very little, what that means is you at this point in time owe more than what your car is worth, so unless you have cash on hand right now to give up to pay off the car you are making payments on something that will not give you a return for your money. Not to mention the high Interest rate you may be paying on it. So the smartest thing to do is to pay it off the car with your mortgage as mortgage interest is TAX deductible the interest on the car is NOT. So by paying off the car with the mortgage you are able to give money back to yourself via the interest write off and you save money because the interest you pay on the car you might as well flush town the toilet. Second, with the low rates that are available today for mortgages you should take advabtage of that now as it may not last forever. Also, you mentioned being charged 10k for the loan - what does that include? Ask to see a Good Faith Estimate - anytime you apply for a loan they are required to provide you with this piece of paper. (even if you go direct to a bank) It should tell you everyting you are being charged, like Broker Fee (if any), Title Fees, recording fee, wire fee, lender fee, interest (which by the way can change depending on the day the loan funds)Plus one other thing to keep an eye out for is a YIELD SPREAD PREMIUM - if you are working with a broker they need to disclose this info to you. It is what the lender is paying the broker for the interest rate he/she is giving you. So what you need to do is make sure they are giving you an interest rate you feel is fair and if they are making money from the lender then that amount should be considered as we all know no one works for free. But it is certainly not fair if they are for instance charging you 1% fee through the loan and making 1% from the yield spread premium. Just make sure you know exactly wha you are paying for.

Sorry if this may be confusing - please feel free to contact me if you need more info. But in the long run refinancing will save you money and you are still young enough that you can pay this mortgage off sooner than you think by just making one extra payment per year or getting a 15 yr term loan or even a 20 yr term loan - the point is why pay interest on something you don't have to when you can include it in your mortgage.

Good luck

L.

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M.P.

answers from Sacramento on

Do you really want to take 30 years to pay off your car vs. four or five or whatever your car loan is now. Just think how much more you will have paid for your car in 30 years! People like to roll over their cars and such into their home loans but why? It would be nice to have only one payment but in the long run, you lose so much more money!

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M.R.

answers from San Francisco on

T.,

I can understand your concern about the costs and adding amounts to your loan balance. As a mortgage consultant, I have helped clients for over 17 years review these very decisions. There are definitely lower rates right now, even lower than 5%, which can save you a lot of money over time. One question would be: how long are you going to be in the home? Another thing to consider is what can you do with the monthly savings; pay down your mortgage faster, save it and build reserves, pay off other bills, or start a 529 program for your daughter.
If you would like to talk further - I would be happy to help you review the mortgage strategies-my number is ###-###-####.

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C.K.

answers from San Francisco on

Hi T.
I have read some of the responses so far and agree that taking a closer look would be in your best interest. I am a mortage planning specialist and work with many financial planners to help their clients reach their individual financial goals. Other comments here have been made about recouping costs and how to calculate savings, but there is also interest savings that no one mentions that can be huge over time. It also is not about how long you will live in the home, but how long you will have this mortgage. Many people will refinance again or move and rent the property. There are many things to consider. Your financial planner is partially right when he says no one pays off their home anymore...many people will not live in the same house long enough to pay it off. As for financing your car into the loan...different schools of thought on that, mine is why not if you can because mortgage interest is deductable and car loan interest is not. Why not take advantage of the tax benefit, it's not really about financing your car for 30 years. I would be happy to show you an analysis in writing of your choices and the costs involved taking into consideration your long term financial plans so you can make an intelligent and informed decision. You can reach me at ###-###-#### or at [email protected]____.com to get more information and a no obligation consultation.
Seemingly small decisions can cost a lot in the long run.

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D.V.

answers from San Francisco on

If your credit is go enough to qualify in this market you should be able to get a lower interest rate and pay much less in closing costs. We had a 5.875% loan and are refinancing with a minimal/small refinancing fee. Check around because everything sounds good but the closing costs are way to high. I've always heard if the new rate is 2 points less than your current (0.2 %) than the closing costs usually are made up for with the amount you save at the new rate.

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C.P.

answers from San Francisco on

Those closing costs seem really high! We refinanced a while ago for much more than that and just had to come up with housing taxes. Maybe you need a different broker! Shop around a little more.
Make sure you get all those costs spelled out.

Good luck!
-C.

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R.R.

answers from San Francisco on

Hi T. - Try Fremont Bank - For more information call:
(866) 865-9601 or fremontbank.com !!

They offer NO CLOSING COSTS loans (nope, didn't have any hidden closing costs either). I've refinanced with them -- experience was ALL GOOD and highly recommend them! They will charge you a refundable $300.00 application fee that will be refunded upon closing. If you don't close, they keep the application fee.

They offer No Closing Cost Loans - Loans up to $417,000

Good luck!
R.

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W.H.

answers from Phoenix on

No one pays off their home loans anymore (big raised eyebrow here)??????? Isn't this exactly why we (Americans collectively) are in this big huge financial mess nowadays???

We (my family and other family members and friends) ARE striving to pay off our home loans and all debt possible.

Yes, there are benefits to having debts in that you can deduct your mortage payments on your taxes but what you get back is a mere percentage of what you actually pay out. Better to have a mortage debt than a credit card debt to be sure, but NO debt is ALWAYS better!

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M.K.

answers from San Francisco on

I scanned down a bit to see what other moms were saying. And for the most part, they were right on! It sounds like your financial planner will be making a commission off of you refinancing and that is not to your advantage, but to his. I also agree that you shouldn't be paying for your car for 30 years. Have you considered a 25,20 or 15 year loan if you do refinance? (One thing I don't like about refinancing is that one ends up paying out for longer because because it is a 30 year loan every time!) The payments are "higher" but you are done sooner. My husband always ran the numbers to see what we actually paid over the life of the loan. That can be an eye opening experience. Another booby trap to watch out for is a prepayment penalty if you decide to try to pay extra on the principle to lower the life of the loan. They getcha comin' and goin' these days!

There are those that think that you must always "own" debt for the tax benefits. My personal experience is that we had a lot more money to spend (or save) when we owed nothing on our house. Yeah, the taxes were more, but the net in our pockets was greater.

Good luck with whatever you decide to do.

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J.G.

answers from Modesto on

Hi T.,

Paying off your house, or at least paying down the debt, is a good goal; your financial advisor's advice seems a little off. I work in the financial industry. Some debt can certainly be good, but it should never be treated lightly.

That said, now may be a good time to refinance for a lower rate. But how about checking in to a different term? See if a 15-year term at the lower rate will change your monthly payment significantly from your current 30-year term with the higher rate. If you shorten the term, you will pay down the principle much more quickly with each payment. You'll be building more equity in your home more quickly than if you stay with a 30-yr mortgage.

However, I don't recommend tying your car loan in with your mortgage loan. Mortgage loans are typically for very long terms, and with interest you end up paying much more than the original loan amount by the end of the term. This is usually okay because real estate is typically an asset that increases in value over the long term. A car is a depreciating asset that almost never increases in value. Thus, the faster you pay off a car, the better--a car doesn't have the increasing value to make up for the extra interest payments you'll be making over the long term.

Bottom line, if you're having a hard time affording your car payments, it would be a mistake to combine it with your mortgage loan. A better course of action would be to sell the car and buy a less expensive model. If you can afford the payments, there's no reason to combine it with your mortgage.

Also, it might be smart to look for a new financial advisor. The advise you shared doesn't seem financially sound, though I don't know your circumstances.

J.

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W.A.

answers from Washington DC on

While it's true that interest rates are lower than they have been in years, you're in a great position financially. I wouldn't do it. If you have 10 grand to burn, I'd put it toward the car and pay it off as soon as possible. Don't forget to pay yourself! It's most important that you have backup. That 10,000 is very important if you don't have at least 6 months in savings built up.

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