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Discussion Starter · #1 ·
Anyone here ever refinance their house only a few years after buying? Not looking to do anything but take advantage of the hot house market and super low rates. When we purchased in 2018, the market was slow and rates were higher. So even with excellent credit we got the best rates at the time at just over 4%. Now they are at 2.5% Refi rates. Mortgage guy says don’t look at a gift horse in the mouth and we would be stupid to not do it with how low the rates are now. But I’m alittle nervous that in the end (when it’s too late to look back) things like closing costs might outweigh the reward in the end. All our goal really is is to pay as little interest as possible for the house and have it paid early.
 

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Back in 2000 I bought a house and the interest rate was about 6% for 30-years. Then about 2 - 3 years later interest rates were down to about 4.5%. I went from 30-years to 20-years with the same payment.... saved thousands of dollars interest. A couple years later rates dropped again and I refinanced for 15-years at a slightly higher payment. I also made extra principal payments and I ended up knocking tens of thousands in interest off my loan and shortening it even more.

Here are some rules to follow:

1. If you plan to move in the next couple years, it wouldn't be worth refinancing because you won't be there long enough to make back the refinance costs.

2. Don't just pay attention to the interest rate but the final APR. Some banks / mortgage companies will offer a really low rate.... maybe 2.5% but when you red the fine print and account for the fees, you could end up paying closer to 3% in reality when you look at the total cost of the loan over its life.

3. Shop around and look for banks / mortgage companies that have the least refinancing fees.

If you plan to live in your home for 5 years or longer, refinance while you can get the low rates. You could end up saving tens of thousands in interest and you can even shorten the length of your loan, which is just as important. If you can make your payment today comfortably, go for a shorter loan and even lower interest rate.

The most important thing you can do in your financial life is pay down debt as quickly as you can. It will give you financial freedom to do the things you dream about when you are younger like travel, get the kids through college, buy toys, buy a vacation home or even retire early. I always paid off loans early by refinancing and paying extra principal. I'm retiring next year at 57. I could have probably retired two years ago but I like having fun with the toys.... like snowmobiles... Spyders.... boats..... etc. and the wife is also expensive.... :lol:

Feel free to PM me if you have any questions......
 

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Slednuck
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Just check what your early cancelation penalty is it should be written in your mortgage. It is likely based on interest rate differential so you may need to consult with your lender to fully figure it out. Some friends were just burned on this. They thought $5k to cancel and it was $15k. As said above look at an accelerated bi-weekly payment, it shaves about 2.5 years off a 25 year mortgage.
 

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Just check what your early cancelation penalty is it should be written in your mortgage. It is likely based on interest rate differential so you may need to consult with your lender to fully figure it out. Some friends were just burned on this. They thought $5k to cancel and it was $15k. As said above look at an accelerated bi-weekly payment, it shaves about 2.5 years off a 25 year mortgage.
Good catch....

I will only get loans with no early payoff penalties. Make sure to ask up front anytime you get any loan.
 

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Go on the Bogleheads.com website and go to the personal finance forum, read the refinance mega thread, its now 155 pages long but you'll learn a lot about closing costs and how to know when your paying to much in closing costs and how to read a loan disclosure, I just refinanced to a 20 yr 2.810% from a 30yr at 4%, I'm paying the same amount I was before and will be paid for in 17 years, hopefully sooner but I have this sled habit that makes a coke habit and hookers look cheap. In full disclosure I don't to coke or hookers! Sleds are my vice. Good luck, rates are not going to rise anytime soon so take your time to do your research, the lowest rate usually comes at a cost, Settle for a good rate with fair closing costs, these zero cost loans come with a higher rate. Very few get the best advertised rates.
 

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You can take a slightly higher interest rate that includes a credit large enough to cover the closing costs (receiving points instead of paying them is another way to look at it). That way you haven't paid any money out of pocket for the transaction, and if you want to refinance into a shorter term loan later on, you haven't wasted any money on closing costs. I did this in 2016 and just refinanced again two weeks ago. I plan to continue making the same payment I was making before, but now the difference will just go towards the principle and will offset the effect of starting over on a 30 year term. There's really no reason not to refinance right now!

I got 3.00% for 30 years with $0 closing costs (a closing cost credit that covered all the fees).

If I took 2.875%, it was like $1500 in closing costs.

Then 2.75% was $2500 in closing costs.

Keep in mind these were the rates I was offered back in September, so might be different scenario right now.
 

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Discussion Starter · #11 ·
Go on the Bogleheads.com website and go to the personal finance forum, read the refinance mega thread, its now 155 pages long but you'll learn a lot about closing costs and how to know when your paying to much in closing costs and how to read a loan disclosure, I just refinanced to a 20 yr 2.810% from a 30yr at 4%, I'm paying the same amount I was before and will be paid for in 17 years, hopefully sooner but I have this sled habit that makes a coke habit and hookers look cheap. In full disclosure I don't to coke or hookers! Sleds are my vice. Good luck, rates are not going to rise anytime soon so take your time to do your research, the lowest rate usually comes at a cost, Settle for a good rate with fair closing costs, these zero cost loans come with a higher rate. Very few get the best advertised rates.
Thanks for the forum recommendation! I have been reading the thread already and it's packed full of helpful info. I'll probably be reading it for awhile :lol:
 

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Just did a re-if on mine. Bought it 7 years ago and did another 30 year. Plan is to make 1-2 extra payments per year to take the extra years back off that I added back on. With two kids and college not getting cheaper I want to have the mortgage to claim for student loans. Still saving monthly money plus interest in the long run.
 

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If you only in few a years its the best time as you start all over paying more interest than principal. Your banker should be able to tell you the in-out if your going to gain or not, have them show you on paper the fee's, monthly payments your now paying and what they will be if you refi, if you can afford it drop 5, 10, 15 years off and pay a little more, have them show you those payments, make them do the work. Find our what the closing cost are, many credit unions dont charge fees for this, something to think about if your not with one.

Dont be loyal to a bank, they all want your business so find one that treats you good and has the least fees out there.
 

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Slednuck
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I am in the middle of re-financing after my first 5 year term. When I bought I knew I would be there for at least 5 years and selected a mortgage based on rate but now I am giving up a bit on rate to go with a lender that can offer a line of credit on our equity so that we can roll that into a 2nd property when we are ready.
 

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1) You have to save 1% and go to 15 year.

Option 2,just pay more on the the current loan.

The 2K you spend on closing costs and appraisals could go right to principle.

Alternative 3: Consider a points by down with your 2K also.

NOW is the time to do something. Previous post about the 6%-that was so low at the time.

Look where we are now.
 

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All the sudden the spammers sure like this post.

Thats alright, they keep spamming we'll keep banning.
 

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Discussion Starter · #20 ·
All the sudden the spammers sure like this post.

Thats alright, they keep spamming we'll keep banning.
I’d love to notice and help, but I still don’t get notifications properly!

And may as well ad an update. We went through with the refinance that year. Glad I did! Sure feel bad for those who are at 6+% now.
 
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