Home Is now a good time to refinance?

[butterfly 17]

HI,
We are thinking about refinancing. Just wondering if now would be a good time since rates seem to be low.

We have a little over 85% equity in the house (based on what we paid for our house 2 years ago, don''t know what it would appraise for now but prices seem to be the same in our area) and our rate when we purchased was 6.25% through Chase Bank. We don''t qualify for the really low rates since we have a jumbo mortgage, but we were quoted around 4.875% from a few places.

What do you guys think?

 

[janinegirly]

you need to find out all the fees associated with the refinance and then do a calculation and figure out how much you would save each month and how long it would take to pay back those fees with the savings. We did a refin and our closing was less than 6 mo''s ago! But we calcuated we''d pay back the fees in less than a year with savings from the refi, so it was def worth it. Also, need to make sure you''re comfortable with the new rate..and not going to have "refi- remorse" if rates go down more..which they probably won''t, but you never know with current conditions.

 

[robbie3982]

Date: 5/21/2009 9:54:09 AM
Author:butterfly 17
We don''t qualify for the really low rates since we have a jumbo mortgage, but we were quoted around 4.875% from a few places.

I''d actually consider that to be really low. We''re being quoted 5%.

 

[Tacori E-ring]

My banker said their mortgages were also going in the mid 4%s. I agree with Janine though. Figure in the fees and points and the decision should be pretty clear.

 

[butterfly 17]

Hey guys, thanka for the responses. Irealize I meant to write we have 25% equity, not 85% equity as I would not bother refinance with so little left to pay off if it was 85%, lol.

That''s the thing, the fees seem to be alot. Estimated closing costs from three different places are about 20K .

Also, I tried lending tree and I got a bunch of referals from Brokerage agencies. I am assuming a bank is a much better lender than a broker, right?

 

[janinegirly]

those fees are crazy, do you live in a city? I know NYC has extremely high fees/taxes in order to discourage fly by the night investors (who will only bring down everyone with them). And the demand is always high, so the City can do that.

but otherwise, you should be able to find more competitve fees. I can''t speak too much for ours since I didn''t do the paperwork, but do know the fees were far less.

 

[MustangGal]

I refinanced a few years ago through eloan, and the fees were around 4k. I wouldn''t recommend them, we had a few bumps, but 20k seems really high!

 

[butterfly 17]

Date: 5/21/2009 10:50:53 AM
Author: janinegirly
those fees are crazy, do you live in a city? I know NYC has extremely high fees/taxes in order to discourage fly by the night investors (who will only bring down everyone with them). And the demand is always high, so the City can do that.

but otherwise, you should be able to find more competitve fees. I can''t speak too much for ours since I didn''t do the paperwork, but do know the fees were far less.

I live in one of NYC five boroughs, so maybe that''s why. Also, they said I had to pay the closing fees up front, like I can''t add it to my refinanced mortgage.

Has anyone heard of North American Savings Bank? They are based out in Kansas and quoted me 4.875% and their closing fees were around $10K.

I am worried to sign with a bank I have never heard of, but Chase(my current bank), quoted me 5.5% with $21K closing fees, so that was too high.

 

[NovemberBride]

One thing you have to think about is whether your house will appraise high enough for the refi. Right now, reputable banks will NOT write a mortgage for more than 80%. That means you have to have 20% equity at least based on the appraised value, not what you paid when you bought. And appraisers are being very conservative in their appraisals because they got a lot of flack for writing inflated appraisals that allowed people to get mortgages on homes where they are now underwater. I would take a look at sale prices for homes in your neighborhood over the last 90-120 days, since that is what the appraisers will use to value your home. If you don''t have 20% equity based on those prices, you won''t be able to refinance.

 

[MichelleCarmen]

Date: 5/21/2009 10:39:23 AM
Author: butterfly 17
Hey guys, thanka for the responses. Irealize I meant to write we have 25% equity, not 85% equity as I would not bother refinance with so little left to pay off if it was 85%, lol.

I was in awe for a second. 85% paid off!!! lol

 

[cara]

Date: 5/21/2009 12:07:34 PM
Author: NovemberBride
One thing you have to think about is whether your house will appraise high enough for the refi. Right now, reputable banks will NOT write a mortgage for more than 80%. That means you have to have 20% equity at least based on the appraised value, not what you paid when you bought. And appraisers are being very conservative in their appraisals because they got a lot of flack for writing inflated appraisals that allowed people to get mortgages on homes where they are now underwater. I would take a look at sale prices for homes in your neighborhood over the last 90-120 days, since that is what the appraisers will use to value your home. If you don''t have 20% equity based on those prices, you won''t be able to refinance.

Second this. If housing prices in your area have come down more than 5% since you bought, you may NOT have 25% equity anymore and this refi is not an option.

But if it is an option, use an online refi calculator to figure out if it is a good deal or not and when your ''break even'' time is on the refinance loan. The basic idea is that you pay money up front to refinance but then save a bit of money each month on the mortgage payment such that in X months, you break even and after that are saving money each month relative to your original loan. If that break even time is 10+ years away (or never!!) then it doesn''t make sense to refinance. If it is 2 years away, and you are pretty sure that you will not need to move in that time, then it may make sense.

Also, it sounds like you are asking for quotes with the lowest possible interest rate from banks. So they are quoting you loans with low interest rates but higher closing costs. You may want a loan with a slightly higher interest rate but lower closing costs so your upfront fees are less. Also it may make sense to decide what you type of loan you want *including* the interest rate, and then ask for quotes and compare the closing costs. The reason to do this is that the banks will have a variety of loans with 1/8% steps in interest rate, making it easier to compare loans across banks if you pick the interest rate you want. The one with less closing costs wins.

 

[butterfly 17]

Date: 5/21/2009 1:34:13 PM
Author: cara

Date: 5/21/2009 12:07:34 PM
Author: NovemberBride
One thing you have to think about is whether your house will appraise high enough for the refi. Right now, reputable banks will NOT write a mortgage for more than 80%. That means you have to have 20% equity at least based on the appraised value, not what you paid when you bought. And appraisers are being very conservative in their appraisals because they got a lot of flack for writing inflated appraisals that allowed people to get mortgages on homes where they are now underwater. I would take a look at sale prices for homes in your neighborhood over the last 90-120 days, since that is what the appraisers will use to value your home. If you don''t have 20% equity based on those prices, you won''t be able to refinance.

Second this. If housing prices in your area have come down more than 5% since you bought, you may NOT have 25% equity anymore and this refi is not an option.

But if it is an option, use an online refi calculator to figure out if it is a good deal or not and when your ''break even'' time is on the refinance loan. The basic idea is that you pay money up front to refinance but then save a bit of money each month on the mortgage payment such that in X months, you break even and after that are saving money each month relative to your original loan. If that break even time is 10+ years away (or never!!) then it doesn''t make sense to refinance. If it is 2 years away, and you are pretty sure that you will not need to move in that time, then it may make sense.

Also, it sounds like you are asking for quotes with the lowest possible interest rate from banks. So they are quoting you loans with low interest rates but higher closing costs. You may want a loan with a slightly higher interest rate but lower closing costs so your upfront fees are less. Also it may make sense to decide what you type of loan you want *including* the interest rate, and then ask for quotes and compare the closing costs. The reason to do this is that the banks will have a variety of loans with 1/8% steps in interest rate, making it easier to compare loans across banks if you pick the interest rate you want. The one with less closing costs wins.

NovemberBride,

How can I find out what houses sold for in our neighborhood? Is there a particular website? The only one I know that gives an estimate is zillow, but I don''t think it''s that accurate.


Cara,

I did what you said and came up with 3.5 years before we break even. Is that good?

The bank I mentioned told me the 4.875% rate was without any points and told me the closing costs would be around $10k max.

Also, aren''t closing costs tax deductible?

 

[NovemberBride]

Butterfly, I don''t find zillow terribly accurate either. The only way I know how to do it is have a real estate agent pull the listings for you off the MLS. When we did our refi we just asked the real estate agent we used when we bought the house to pull the listings for us. Make sure he/she pulls only houses that have settled, an appraiser won''t use list prices or houses in escrow.

 

[butterfly 17]

Thanks, I will do that.

On Zillow our house value is only $17k less than what we paid. There is a house up the block that just sold about two months ago, but I don''t know how much it sold for.

 

[skimmy]

i'm not sure how accurate it is for the other boroughs outside of manhattan but i use www.streeteasy.com
and www.propertyshark.com.

hth!

 

[Dancing Fire]

Date: 5/21/2009 10:59:54 AM
Author: butterfly 17

Date: 5/21/2009 10:50:53 AM
Author: janinegirly
those fees are crazy, do you live in a city? I know NYC has extremely high fees/taxes in order to discourage fly by the night investors (who will only bring down everyone with them). And the demand is always high, so the City can do that.

but otherwise, you should be able to find more competitve fees. I can''t speak too much for ours since I didn''t do the paperwork, but do know the fees were far less.

I live in one of NYC five boroughs, so maybe that''s why. Also, they said I had to pay the closing fees up front, like I can''t add it to my refinanced mortgage.

Has anyone heard of North American Savings Bank? They are based out in Kansas and quoted me 4.875% and their closing fees were around $10K.

I am worried to sign with a bank I have never heard of, but Chase(my current bank), quoted me 5.5% with $21K closing fees, so that was too high.

WOW!! you better plan on staying in this house for a long time.

 

[Efe]

How can I find out what houses sold for in our neighborhood? Is there a particular website?

This might help: http://www.nyc.gov/html/dof/html/property/property_val_sales.shtml

 

[movie zombie]

i''ve also read that appraisal fees for refi have gone up.......make sure all quotes for fees are current/accurate. higher credit scores are also being required. an easy refi is a thing of the past.....not impossible, but a lot more hoops to jump through.

mz

 

[butterfly 17]

Thanks for everyone''s responses.

I will have to think this through a little while longer.

My DH and I both have great credit scores, high 700s and low 800s.

The appraisal fee is around $475.

Do rates usually go up in the summertime?

 

[cara]

butterfly- sorry I didn't reply earlier. I'm not an expert or anything, but 3.5 yrs sounds a bit middling as break even time. Obviously if you are planning to be in the house for 10+ yrs and have stable jobs, stable life then you will eventually earn money on the refi. But for the first 3.5 yrs it will be a more money out of pocket than just keeping your old mortgage. I would also be concerned about how accurate they are at estimating closing costs, obviously interest rates change every day, and of course the big money question is the appraisal value. But if everything checks out it could be a smart move. These are historic low interest rates.