Should I refinance my mortgage if It is at 5% and I can get 3.8%?
Question by Just a Guy: Should I refinance my mortgage if It is at 5% and I can get 3.8%?
Balance on my mortgage is 480,100.00
Here is a look at my current mortgage rate:
monthly payment: 2,995.70
Rate: 5%
Loan Type: 5/1
Effective Date: dec 21 2006
Maturity Date: Jan 01 2037
Margin 2.50%
Max Rate Adjustment: 2.0%/ 6.0% Life
Lifetime Max Rate 11.0% Life
Early Pay off : 1 year (so no penalty at the moment)
HERE IS THE NEW RATE:
Closing cost: 2,500.00
monthly payment: 2,409.83
Rate: 3.875
Loan Type: 5/1
Effective Date: May 1, 2010
Maturity Date: Jan 01 2037
Margin 2.50%
Max Rate Adjustment: 2.0%/ 6.0% Life
Lifetime Max Rate 9.875 % Life
Early Pay off : 3% if paid within 1st year
Is it worth it to refinance?
Please note:
I have no credit card debt
I have and IRA and annuity which I contribute to comfortably
I’m 30 years old and employed.
oh I plan on paying my mortgage off in 3 years.
Best answer:
Answer by Love my Meyer
Yes, your first 5 years is almost up and your rate will increase. 5/1 arms should really never be used unless you will be moving or paying off the loans with in the locked in 5 year term. In the next 5 years the rates will go up and your rate will be higher than if you would just get a 30 year fixed loan. It will save you money over the long run.
What do you think? Answer below!
Tags: 3.8%, Mortgage, Refinance
No, the fees and terms are not worth the reduction. I would refinance if you can get a fixed rate but the adjustable rates are not significantly different enough to justify any, refinance costs. You are better off applying one additional payment at the beginning of the year toward the principal.
LOL! Another ING Direct borrower, I see.
Is it worth it? It depends on what you think interest rates are going to do in the next two years and what is the base index that the 2.50% spread is added to (CMT or LIBOR, and what maturity). I see that your mortgage does not reset until Jan 2012. I would say that interest rates then will be higher than they are now. It is quite likely that the rate in Jan 2012 will be around 5%.
By my calculations, to make it worthwhile not doing anything, the new rates in Jan 2012 and Jan 2013 would have to be 3% all in. I think that this is unlikely. I would refinance now given that you will pay off the mortgage in three years from now. You save more than enough to compensate for the $ 2,500 fee. You do realize that your next payment, on May 1st, will be at your current interest rate. The new rate would start for the June 1st payment.
No not if paying off that soon It is not going to save enough