I purchased in April of this year (2024), rate is 6.25% no points. Purchase was $669,000, I put ~27.5% down. I emailed my lender back in September to refi, he said to wait (wish I hadn’t!). I’ve realized that I can handle extra payments, so I have been paying an additional $2500/mo on the principal since month #1, so I’m on track to pay off the loan in 10 years at 6.25%. I have $475,000 left on the loan.
Would it make sense to refi to 15 years for a lower rate or should I just wait to see if mortgage rates drop in a year or two? I see one of the local credit unions is offering 5.625% on a 15 year (which is what the 30 year was down to back in September). Credit score is 780+.
Sawyer said:
Loan officer here - I would wait a bit longer. It’s not the right time for me to recommend refinancing unless you are in the high 7s.
So, in your opinion, it wouldn’t make sense (in my case) to refinance from 7.125% 30yr fixed to a 5.8% 15yr fixed? I posted in another thread but I wanted to get your answer if you didn’t see it.
The 30 year rate you have now isn’t bad. The 15 year is going to increase your payments and while that may be comfortable now, is it going to be if something happens to your income? The extra voluntary payments you’re making are the real key here.
If you’re certain of your income stability/ have the reserves to weather a storm then mathematically speaking a shorter term with less interest would help you pay it off faster. But there’s probably not enough benefit to justify making a move
@Sawyer
To quote Mike Tyson, “Everyone has a plan until they get punched in the face”. As a homeowner, there’s always a punch in the face when you don’t expect it. Job loss, boiler, roof, car, etc. My advice is to keep the 30 and pay down when you can.
@Sawyer
^this. The fact that borrowers can prepay most loans without penalty is such an underrated benefit. Some people need that pressure of a 15 to keep them motivated I guess
I never see people complain about getting a 30 year instead of 15.
I do see a bunch complaining about getting a 15 instead of a 30. I would just overpay the 30, it’ll add 8-10 months onto the overall loan, but you have the flexibility of the lower payment down the road. It always seems people want to hold a property as a rental and realize that they can’t make that happen on a 15 year term but 39 would have been ok
@Darian
When I refied in 21 I went from a 30 to a 20 instead of a 15. Reason being the extra flexibility of life changes. In my case, interest difference over the life of the loan if I prepay the 20 vs the 15 is <5k. With rates where they are I would say stay with the current unless it drops a significant amount. Prepay like it’s a 15.
15 year usually doesn’t make sense. Just keep paying extra on the 30 year if you want but I’d make sure that you were funding all of your retirement and savings vehicles first before dumping extra money into your house.
Personally, I would not. Technically, mortgage is one of the loans where you can indeed get the money back if you need it later, the issue is when you need it, you are least likely to be approved for a refi or HELOC (because you are out of work). I don’t think a half a point is worth refinancing for, I would just keep paying the extra and end the loan early. It’s generally worth it to have a lower payment if you need it. If your HVAC goes, and it’s 15k to fix, right now you can just make a lower payment for a few months. If you are locked into a higher payment, it’s not an option
Only reason you were told to wait is that lenders get their commissions after the first 6 monthly payments.
Anyone reading this should be careful.
There is absolutely no rule that forces you to wait to refi.
Great lenders will try to help you no matter how soon after closing you want to refi and especially now with rates swinging in different directions every other week.
@Breck
Yep this is correct on conventional or non-qm loans. But FHA/VA loans do have a seasoning requirement of 210 days from your first payment date so any 6 month advice is correct on government loans.
@Breck
This is not true. We get paid immediately when the loan closes. The main difference if you refinance within the first 7 months (6 mortgage payments), is the loan officer has to GIVE BACK their commission. It’s called an EPO (early payoff). FHA and VA have a mandatory waiting period before you can payoff the loan. 210 days.
I’m considering a 1 time close construction to perm loan and have been shopping lenders for the last month. The last lender I talked to told me he would refi me whenever I wanted no matter how soon after I closed but would appreciate it if I stuck with them for the refi and that’s when he told me about the commission payout.
