Current rate: 6.99
New rate: 6.5
BMO is giving lender credit of $7200
Total loan cost of refinance will be $4300
While this isn’t a big difference, they said it’s a no cost refinance so we won’t pay anything out of pocket. Is this a good deal?
Loan amount is: $1M
When the lender is offering a credit or incentivizing you to do something, take a hard look. Most banks and lenders are not in the market to help you or lose money.
Gale said:
When the lender is offering a credit or incentivizing you to do something, take a hard look. Most banks and lenders are not in the market to help you or lose money.
They need us to bring some of our savings into their bank, that’s one condition I’m aware of. Like alot of others mentioned I’ll be asking them will my loan amount be changing at all
@Blair
They’re going to roll the fees into the loan. Also - how much savings? I’ve had plenty of banks give me the same bullshit your getting then the final statements are all clearly not what was discussed.
OP refinancing is never 100% free
Mackenzie said:
OP refinancing is never 100% free
I feel the same way and that’s why I was skeptical when the loan officer insisted it’s good idea to refinance since we have such a high rate of
Mackenzie said:
OP refinancing is never 100% free
Over simplified, provide more detail if you’re offering financial advice. In his case he’s technically making money… Yes he’s likely paying an eighth higher in rate to get the credit so it’s ‘technically’ not free … but the smidge higher rate saves him money in monthly interest, and nets him $2,900 towards impounds (guessing you know what those are since you’re offering advice here). Assuming no prepay then how is your response of any value?
Would need to know the loan amount and term to find the break even points. Example, on a 100,000$ mortgage, half an interest point is $500 a year, so the no cost is no out of pocket, it adds $4300 to the loan which would take nearly 9 years to break even, and the question becomes if rates will go down more in 5 years. Now if the mortgage is $300,000, it breaks even in 3 years, and may make more sense. I don’t think this is a large enough gap or worth it in my opinion.
@Blair
Loan amount is $1M and that’s why I was considering it
Blair said:
@Blair
Loan amount is $1M and that’s why I was considering it
That’s a different story, yea I think this could make sense then, because payoff looks to be in under a year. You are basically gambling that rates aren’t going down next year. I think I would personally wait a couple months since Rates just ticked back up. It’s your mortgage though so you get to make the final decision, yay!
@Blair
Yea I have been feeling the same like they might go to 6 at least in few months but no one can predict that 
would it impact credit score if I refinance again in 3 months say
Blair said:
@Blair
Yea I have been feeling the same like they might go to 6 at least in few months but no one can predict that
Yes slightly. But if you are even considering refinancing within two years it really doesn’t make sense to pay fees now.
Better to see if they can do 6.625 or 6.75 with Zero net fees
Do you have the official loan estimate? I was getting quoted pretty nice numbers until I got the loan estimate and the fees magically increased. Also is the loan amount staying the same?
Depends on what you owe still. For a higher loan amount it might make sense, for a lower amount it might now
I don’t think I need to even crunch the numbers to know that this is probably worth it, even if only because the loan amount is so high that a small change in the interest rates could save 10’s of thousands in the long run
Remember that when you refinance you start over in terms of the % of your mortgage payment that goes to interest v. towards paying off your principal. Just something to take into consideration.
Paxton said:
Remember that when you refinance you start over in terms of the % of your mortgage payment that goes to interest v. towards paying off your principal. Just something to take into consideration.
This is wrong. Your interest is calculated based on the remaining loan balance. That’s why they are higher to start. But if you are lowering your rate and the balance is remaining the same, you are paying less interest immediately.
@Payne
Nope, you’re wrong. Look at your amortization. You pay way more of the interest up front, preventing much from hitting principal. If you keep refinancing in the first year for 30 years you will find yourself paying only like $1k of principal in the year and forever paying interest as you jump onto another mortgage.
@Darin
This is because there is more principal!
Interest accumulated is simply:
Daily rate x principal x number of days.
That’s it. It’s not some bank truck to make you pay more interest.
If I am starting a 30 year loan for 200000 at 5% interest, or I have 15 years left on a loan with 200000 at 5% interest, the amount of interest I pay will be the same.
@Darin
If you keep refinancing you’ll pay less principal because you’re re-amortizing the loan over and over. That doesn’t mean you are paying more interest. It means you’re paying less principal.
As the other commenter said, interest is calculated by the rate, principal balance and number of days. The remaining term of the loan doesn’t factor into the calculation.