I’m a first-time homebuyer (and also refinancing). I’m thinking about locking in a mortgage rate below 6%. I know that’s just a number, but it feels more secure to me. I hear that the Fed might keep lowering rates next year, but I’m not sure how that affects mortgage rates.
The origination charges are about $2,000, and the service charges are $3,750, so the total cost is around $5,750. This doesn’t include escrows, which I don’t think I can avoid. Our monthly payment for principal and interest would go down by about $400.
So, does this mean we break even in about 14 months?
What do you think?
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I suggest asking for negative points, securing a 6.25% rate, and achieving a breakeven point with minimal time required. Then, repeat the process as rates continue to drop.
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This is exactly the right choice for us. We were just offered a 5.5% rate with no points or 5.75% with all closing costs covered. It was an easy decision for me since I plan to refinance again if/when rates drop. This lowers our rate from 6.875%. Essentially, there’s no break-even period, and we’re even expected to get a small amount back at closing while keeping our mortgage balance the same as it is now.
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Who is your lender? I’m looking to refinance and exploring different options.
It depends. What are your short- and long-term financial goals for the house?
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I should have mentioned this earlier. We plan to stay here for at least 5 years. Even when we move, our goal is to keep the property and rent it out, although that might be easier said than done.
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What are you paying now, and what will you be paying?
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From approximately 3310 to around 2900 in principal and interest (P&I).
Correct. If you stay in the mortgage for at least 15 payments, you’ll have recouped your costs and started saving. Refinancing before then puts you in the red, and if you refinance right after, the calculation resets. I believe if the savings will benefit you and you’re not keeping close track of refinancing trends over the next two years, you’ll be in a good position. Unless rates drop significantly (which isn’t expected), you can revisit the numbers later. I work in the mortgage industry.
A break-even time of 14 months is excellent. Is this rate option effective starting today?
I began the process roughly ten days ago, but it remains locked in.
To put it simply, I consider a break-even period of under 12 months to be an A+, which still qualifies as an A on my scale. As a long-time real estate investor, I’m always seeking an edge in my investments.
If the total origination charges (including underwriting fees, processing fees, discount points, etc.) are indeed $2,000, then a 5.99% rate is an excellent deal at this time. I would definitely recommend locking that in.
The 2K covers the commitment fee and technology fee. Additionally, approximately 750K is for services I didn’t compare prices for, and around 3K is for services I did compare prices for.
$750,000.00 for services you actually researched? Lol, no thanks.
Whoops, haha. I didn’t shop very well.
This is a really bad deal. I would only consider it if I had a low credit score. If you explore your options, you can easily find alternatives where some offer “negative points” (which means you receive money) that can assist you with a no-cost refinance.
There’s a good chance of a soft landing by the Fed and potential rate reductions within the next year, so you may want to think about refinancing again.
Keep looking. One tip is to check with local credit unions.