I finally did it!
After few months of "thinking about it", hearing others talk about it, watching the rates, talking with lenders, attending a seminar, and evaluating if it's worth for me, I finally locked in the rate on February 11th.
I was able to get a great rate of 4.625% with 1% origination fee, which is 1.5% less than my previous rate, 30 years fixed. It adds up in savings of $147 a month in P&I, but since my taxes went up, the monthly saving for this year will be $113.
The machine started moving quickly after the rate lock; I had an appraisal the week after. Based on the comparables sold in the last few months, by house was appraised at $7000 more than what I bought it for 3 years ago, but about $15000 less than what the city appraised it for a year ago for tax purposes. It was still more than enough for the 80% conventional loan that I was applying for, so with all my other financials I had no problem being approved for the credit.
I decided to only roll the escrow account deposits into the new loan and pay the closing costs up front. It was a good timing for that decision, with the tax refund happening around this time, the mortgage payments not starting for two months, and the old escrow account balance that will be refunded to me. Even with that cash deposit, my new loan is about $2500 more than previous loan pay off amount was, and it extends the loan for another 3 years that I had already been paying for. I plan on setting up biweekly payments, and making additional payments towards principal whenever possible, so I hope to bring the life of the loan down to about 22 years - still it seems like such a long time.
I had the closing on March 5th. I feel so relieved not having to think about that decision any more.
2 comments:
In your research, when "should" you refinance? I think I heard at one point that it's only worth doing if the interest rate was 1.5%+ less than the current interest rate you have.
Peronally, I don't think there is a magic number that works for everyone. What I was advised to look at is the amount of time it will take the monthly savings to add up to the closing cost. I will see the benefit only if I stay in the house after that period.
In my case, it was 26 months. So, after about 2 years I will have had payed off the closing cost, and the further savings are a profit. If I didn't plan on staying in the house at least 2 years, I wouldn't see that profit.
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