When Does Refinancing Your Mortgage Make Sense?
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- Опубліковано 6 сер 2020
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Im refinancing from a 4.375% to a 0% when I pay the mortgage off this year.
Comment of the year
But why were you paying 4.375 lol
LIES
@@kbanghart I work with mortgages, anyone paying 4.3 rn missed out on serious savings.
The question is: how long did it take you to do that...
Oh my when he said he was going to keep it for 18 months...the reactions!
Thanks, Dave & Chris! No one has been able to explain the break-even point as clearly as you did. This will help me and my clients greatly.
Still the best, most accurate way to show the break-even point is by comparing amortization tables. Dave's method doesn't take into account the payments and where you are on the current mortgage relative to the amortization.
Just refinanced. Was 18 months into a 0 down 30 year 5.75% int, now i'm on a 15 year 2.25% int. With appreciation, my home value is now more than 80% of the loan so I avoided PMI too. Luckiest thing that's ever happened to me. My monthly payment went up $200.
Wow! Congrats!
Did you have to put a down payment?
I just got one in which they paid me to refinance from 4.75 to 3.375 ..in other words the lender credit was more than the closing costs and my payment dropped 200/mo
I like where Dave says your not going to refinance a 30 year loan at 3% to a shorter term loan, say 15 years. Just add the difference in loan payment to the 30 year loan. This is also helpful in these times of uncertainty. If something happens, job loss, or salary decrease, you can then go back to making payments based on the 30 year rate. If you refinance for a 15 year loan, if something happens, you are stuck with a higher payment that you can’t get out of, then possibly foreclosure. The only way to make a15 year payoff any better is if the interest difference is 5 or 6% between the two loan terms.
I refinanced back in june from a 6.125% to a 2.99 with rocket mortgage, saving over 250 /mo. I'm still throwing that 250 and than some to the principal
Is that a variable interest rate? If so, you may not be saving anything in the long run...
You should be able to invest for higher returns than the 2.99%, I have a CD at 3.68%. Maybe look into investing that $250 and then some into investments, instead of paying off free money?
@@whatta7793 thats a bad idea. Its better to focus on one thing then once completed go full crazy on the next thing
How long is your term? Did that change??
@@sonyacurti did it for 360 months
Looks like my math teacher was right, math is useful, and fun... fun cause saving money is fun
Black Vito - Moneyology yessir.
spending if more fun and brings happiness
@@lolwtnick4362
No not at all
Look up Gene Kim
But I still don’t use algebra 🤷🏻♀️
I was a mortgage banker for 15 years. You can actually convert a 30-year mortgage into a 17 year mortgage by sending only 1 Extra payment per year in January. So instead of 12 payments per year that you normal would pay, you make a total of 13 payments during each given calendar year.
That 13th payment needs to go to principal only and make sure you write that on the memo of your check otherwise the bank will assume it's their interest versus 100% Principal. You won't feel the added stress of making that high 15-year mortgage payment. Plus you will have the benefits of a 30-year loan payment with this accelerated interest reduction. This will drastically save you hundreds of thousands.
@@saulgoodman2018 There already is, if you get the right type of loan.
I dont think this statement is correct. Adding one extra payment per year only reduce a little over 3 years of the loan. It changes a 30 year loan to 27 years, not 17 years
Math?
@@saulgoodman2018 Saul, I couldn't agree with you more to pay extra monthly, that's what I always did before I paid off my house at age 45. If you have self-discipline it should be easy for you to take control, it's your life. I think it's criminal to have prepayment penalties, your loan officer or mortgage banker should always lead you in the right direction or the client simply needs to demand it by speaking up.
I would definitely not recommend this (Ex) mortgage banker if he believes this statement. It's as easy as putting it into a loan calculator. It sheds off roughly 3 years, NOT 13, sheds off roughly 5 years if you're also talking about including the property tax and home insurance, depending on how much that is.
I'm in the middle of a refinance right now and going from a 4.375% to 2.0%. Woo!
Wow!!
What are your closing costs?
@@dete503 I don't have a final number yet, but they estimated between $2500 - $3000. I'm supposed to find out next week.
@Johnny Five No, I didn't have to.
@@JonathanRansom wow that's good
So much helpful. Thanks both and bless you.
Just refinanced our home went from a 30 year 4.75% rate with $87 per month going to PMI to a 15 year 3% rate no PMI we are ACTUALLY SAVING MONEY!
Ayyy awesome job!
@@JoeGarofaloII that is great , sounds like I need to refinance
Same amount of years/term ? 15 or 30?
People also factor in their prepaids into the closing cost breakeven calculation. Probably costs less than the 5k he mentioned.
Good information! Thanks so much!
Great call and advice!! Thanks
Chris with the side answer...too funny
1% rate reduction on $200k saves less than $2k each year. The principal is lowered each month so over a year, it's less. The second year saves less and so on.
I refi’d with the scenario you gave. I factored in how much more principal my payment was knocking out.
That is true, but the principle to interest is changing very incrementally over that time. So small that in a year you may only be paying an extra 50 dollars if that. For instance mine goes up 3 dollars each minimum payment. So it’s almost negligible in the calc.
I would add one more thing to this. If you itemize your deductions for taxes, your savings are only 75% of interest difference (assuming 25% marginal tax rate). One more consideration, if you are getting rid of PMI as result of refi, that adds to your savings. More complications - you often have a choice on how you structure your refi - lower closing costs and higher rate or higher closing cost and lower rate; unless you plan to move soon, most people would be better off selecting higher closing cost but lower rate.
Or if you plan on paying off your mortgage faster
This was very informative.
Thank you!
Refinancing from a 3.75% to a 2.85% 20 yr mortgage. I didn't want to push my luck to a 15 yr Mortgage.
I love you show dear Dave Ramsey
Oooh it’s Chris!!! Miss ya buddy. Hope you are well and keeping your head up 👊
I hardly understood any of that. Do you have a resource that goes into the same issues in greater detail and with more explanation? Thanks.
# Google
I only do 0 cost refinances. That makes it easy to calculate, if rate drops then refi, with nothing to lose.
This just helped me with my car refinance, once I get out of negative equity
Don't buy new. Buy a 5 year or older, all cash
I just went from a 30 year 4.5% down to a 15 year 2.375% ..my mortgage total went up about 8k after everything was said and done. Those guys don’t work for free. But hey, I’ll be saving over 100k in the long run
I imagine a big portion of the $8,000 is escrows, which you’ll get a bulk back with the refund check you’ll get from your previous note holder.
Should have been nearly cost free.
@@raleighrmb I didn’t pay anything out of pocket because it was all put into the new loan.. nothing in life is free
@@laughlikecharlie9040 they typically or often are already skimming some interest spread. Plenty of refi have no real out of pocket (a few hundred $) or principal hit. It's really not that expensive or that much paperwork. People often dramatically, dramatically over pay.
wish I could have a sit down with you two guys.
Back in the days I was a single mom of three young kids and trying to make ends meet. I had the home in L.A. area and my mortgage was $2,600 monthly. It was so hard I was just working to pay the bills and barely had any money for groceries , gas money , insurance, car loan. It was tough so I had no choice but to refinance my house three times within 10 yrs I spent there. I would take out all the equity and remodeled my house So once I sold it in 2007 for $665 ,000 I owed everything I just got about $8 ,000 of equity. I bought it for $229,000 back in 1997 and sold it in 2007 for $665 ,000. I've learned my lesson
Probably worth twice that today
Oh well - you were able to write off the interest . 8k equity - oh well - atleast you learned how to make it through as a single mom - not easy being single raising a family - no way Jose ! Good luck 🇺🇸👍looking forward
As a former loan officer in the mortgage industry, surprisingly there are a lot of dummies that wonder why the payment increases when refinancing into a 15 year at a lower rate. The reality is though most people can’t afford a 15 year when completing a purchase transaction.
I just did the math. If I refinance I'll save money (barely when considering interest paid and closing costs). We plan on keeping the home
He really is just wafflin'
Very helpful. I am in the refi process now and the break even point was confusing. This has cleared it up!!
I'm in the middle of a refi also, but after seeing this video.....I don't think I'm going to continue with it. My break even point is right at 3 years. I just don't think it's worth it right now🤷🏾♀️
@@Vanessa47912 I decided it wasn’t worth the hassle and stress.
@@genxx2724 Exactly! Now if I was early on in my loan - maybe. But I think I'm too far into my loan to see a real benefit.
Dave hit it on the head and keep the 30 if you got a decent interest rate and make an extra payment on the principal . This is what my daughter is doing . This way you pay it off early . Maybe 15 years or sooner depending how much extra you can put towards paying down the principal . It also gives you a safety net if you have employment or cash flow problems you still have a smaller payment to make over a 15 year mortgage if need be . A mortgage is immune to inflation . The payment is the payment . I payed off my mortgage back in 2004 . I had a 30 year at 8.25% . It took me 4 years of payments before I went to the bank and paid it off . I think I still paid about 10 grand in interest on a $45,000 mortgage . Now you need to be a discipline type of person that can pay down a mortgage at an accelerated rate if not it would make sense to begin with a 15 year mortgage .
great informative video
If you can drop 1 whole point, it’s worth it.
If you can drop 2, it’s even better.
I have excellent credit - 843 Fico.
I have 2 houses and want to refi the second.
When I bought the place in 2018, the prime rate was 4.7. My mortgage on it is $2020.
I don’t know how long I’ll keep the place or if I’ll move and that’s the main reason I don’t wanna refinance immediately.
Furthermore, the economy continues to worsen and the rates continue to drop.
But thus far, all I’ve been offered is 3.5%.
And they want $8000 up front. My break even is 5 years.
I just close my refinan,I wish u did this show a mounth a go.
Good explanation of interest savings, vs cash flow savings. Both are important to understand and understand the difference based on goals and plans/needs.
Looking at these comments from 2024 is depressing
Seeking advice..
I’m a first time home buyer with a 130k, 30 year mortgage @ 7.25 interest rate. I put a 3% down payment. And I pay 1,120 a month. I would like to keep the home but don’t know if I should sell it or when to refinance. I make at least 3k biweekly and 0 debt . Thank you and I appreciate the time and advice . Really considering calling the show lol..
Did you want to refinance to a 15 year? There may not be a point in refinancing right now since rates are still high. Do you make $3k every two weeks? If so you are probably okay and can put extra money towards the house quickly enough to make the 7% rate not hurt so bad in the long run.
@@JamesJamersonIsAGod thanks for the reply bro. That’s what I was thinking . I do make at least 3 k biweekly. I’ll just put extra what I can instead of a refi . Also working on increasing my income currently
I had the same question with the same previous rate and almost same balance lol I just refinanced.
That’s only true if your paying it on schedule, if you pay off early then you shouldn’t worry about Interest rate
It still makes sense if you are going to break even quickly. Plus if you are like me you are just applying the difference to the principle.
I just refinanced my home at 2.5% @ 15 years. Old loan: 30 year with 27 years left on a 3.75% rate.
What bank did you get this rate?
Check with lendingtree..
@Theo B - Cornerstone Lending
Lower interest rate and shorter term. Can't beat that.
why? because youre a poor investor?
Dave, why do you have guest hosts, if you dont let them speak?
I used a State Grant to purchase my home, which came with a higher interest. I had a 30yr Fixed @ 5.625% and went to a 15yr Fixed @ 2.5% , no longer paying PMI, and my monthly payment went up by only $80🤯 that is a 3.125% SAVINGS
id like to kiss your face
Very nice refi!
@@SillyGoose2024 Jesus christ
$5000 closing cost? That's too much !
If you are waffling or undecided...why are you buying...
Yeah. A guy who doesn't know where he'll be in 18 months sure sounds like a renter to me.
A person doesn't just know the value of the APR. Always ask what are the closing cost and expenses property taxes and insurance in dollars and cents. It helps also to request a breakdown of including in the loan and/or excluding. Just so you can see the payment difference it may or may not be important 😉
I did all math/due diligence and even asked for past utility bills from former owner.
But the most important thing for me was paying off early with no penalty and getting it in writing.
Miss you Chris!
Yup
I like how chris is faking his math on his notepad and pretending like he’s following.
He knew the how the but not the why haha
' hold on, let me write this down' -- writes nothing down lol
He just drew a bunch of stick figures.
😂😭😂
Whose lending at 2.2% ?? I want those rates
I hate to say it but Chase. I’ll go shower now
It is out there. Few montha back we snagged a 2.8
Rates have dropped since.
I got 2.4%
BB&T had a 2.5 15 year refinance
Lowest I have seen in McKinney,Texas is 2.5% for 15 yr
Just fixed for 5 years at 1.49% (in the UK) mortgage money is stupid cheap at the moment!
What about a 20 yr at 2.75....from a 30yr at 4.75 ....Im in the middle of refinancing my loan.
If you're really intune with your money.. go 30 invest what you would pay in a 15 and make more money in the long run...
When the interest rate is lower than your current one, or when you have enough equity to cash-out refinance and buy another property.
Lol don’t let Dave see the second suggestion.
Dumb suggestion... keep cashing out any equity you got and you will never own anything.
@@MJ-cf9nl just a second house right? And would still have equity in both of them, and rental income from one of them.. how do you think people get rich in real estate? By doing exactly this..
I’m in the process of refinancing to cut off 7 years off the life of my loan. Payment went up $100. I think that’s worth
Brandi Dupree yes absolutely worth it! congratulations
You can just send extra money ,it does not make sense
@@jcj6892 yes...i am currently at 4.25% and qualified for 2.99%
@@sammax4245 i lowered my interest rate (4.25% to 2.99%l, cut 7 years off of my loan in one transaction and still have the ability to put more towards my loan if I want to ....makes sense to me 🤷🏽♀️
Joseph Jacobs definitely...this is our “forever” home
Excellent advice and guidance! Thank you so much.
Hi there I just love what you said if you have 3% to not refinance I've been in my home for 6 months now I want to kick off my PMI I am at 3% at the moment but I'm more concerned about saving on PMI can you help plz?
This seems incomplete. There is no mention of the monthly cash savings from a higher interest to a lower interest loan that would, if the home were NOT refinanced, be an opportunity cost. Those savings could be put into any interest bearing account. It's always good to pay down debt, but it's not AS good if the money could grow faster than the interest expense of the loan. Am I wrong?
How long do I have to wait to refinance my house?
Gotta run the numbers to make good financial decision.
When you have 100k Equity and lower interest rate then refi
I agree with them. We're refinancing as well to take advantage of the low rates going from
Old Loan: 30 year fix, 4.375%, 23 years left
New Loan: 30 year fix, 2.875%
Closing cost ~$7k so will pay itself in less than 2 years.
No more PMI so an additional saving of $70. The new loan will reset the clock but I feel it'll be worth it.
We're going to pay at the same rate as if we had a 15 year and plan to make additional payments when we can work the hopes to have it paid off by the time I'm 50 (I'm 40 now)
I'm in similar position, are you using traditional bank or online reference?
I like what you’re doing. I don’t know why people lock themselves into a higher mortgage payment each month when you can do what you’re doing. The extra every month goes to principal and it lowers your overall interest payment since you slide forward in the amortization schedule. Also gives you the flexibility to pay less if something hits without falling behind in payments.
You could pay off the new loan like it was for 20 years.
Only 5.1 years for the average mortgage? Wow that sounds short..
People move a bunch, refinance the loan, foreclosure, second mortgages. That number is scary for the health of American finances
on the bank books, the bank sells the loans. i don't think he's referring to actual homeowners moving.
He said the average loan duration 7/2 years as anybody ever pay off their home,? Better just to buy a rv if you move luke that!
@mr anderson I inherited it from my father But yes mine's paid for little old house
We have a 30 year but are paying it off in less than 15. We could not afford the higher payment or felt it would be cutting it too close with a 15 year. If we have extra we pay it and since paying off all other debt we have freed up the extra money to throw at the mortgage. It will be paid off by December 2021 at the latest.
Nothing wrong with that but you can usually get a lower rate with a 15.
Or should I keep my balance and make double additional payments ?
Don't pay refi fees. Take that expense and pay extra towards principle .
That’s what I did along with overtime,bonuses,profit sharing,$4k-$6k/yr tax refund, and a steady monthly minimum of $200 a month from day one regardless and increasing with raises.
And I bought a home I could truly afford compared to my coworkers.
Paid off 30 year in 9 years.
I'm 5 years into a 30 year mortgage at 3.8% and I'm on the fence about a refi
I just went from a 30yr 4.5% down to a 15yr 2.375% right now is a great time to refinance
We had 26 years left on a 4.25%. Went to a 20 year @2.65 at Quicken loans. Was fast and closed in 17 days. Payment stays the same.
2.75% 20Y no point is what i got near Seattle...
Ooh Everett here.
Only if the new interest rate saves you more money than the refinancing process costs
Yup
💯
Minority Mindset was suggesting refinance as todays lower interest rates could be as low as 3% on some loans, so I decided to look into it. As I have never done a refinance before, I wasn't certain if it would be worth it in my situation as I didn't know what all I needed to consider. I decided to call my bank as I figured it never hurts to ask questions. In the end we decided it wasn't with it in my situation but I did gain a lot of invaluable knowledge about how refinancing works & what I need to consider when trying to figure out if it's worth it.
Not true I had a fha loan so when I refinanced I saved that $140 a month plus my lower interest rate
Over the 30 years. No
What did they charge you for doing that. It certainly wasn't free....
You zipped past the 1700 on top...what was that figure?
But so many people don’t notice that they added years to their payments.
Take a higher rate with no cost on such a short term of planning on owning the home
What if I want to refi my 2.75 fha with PMI to go conventional to get rid of PMI and new rate would be 3.375?
How can I call in and ask a question?
I wish I could ask Dave a question?
Very sensible and understandable explanation of this potentially dire topic. I thought it would be a no brainer to refinance from 3.75 to 2.75 because it’s reducing the rate by 1/4. But the closing cost is $4500 and the refinance rate is higher than the new mortgage rate; something to watch out for. In my case the escrow for insurance and taxes is 1/3 of my payment now, so even at a lower rate there’s not much to cover the closing costs.
He called him Allie lol
Thats his name what was he supposed to call him
@@1astrocytecell780 I could have been wrong. It looked like it was spelled Ali (ah-lee) like he pronounced it wrong. But I'm not sure why it made me laugh that day...
Just pay the 15% lump sum every year and bank the savings in interest.
I went from 4.59% plus $678 a year in admin fees and $300 renewal fee to 1.95%.
My closing costs were $2000.
You're assuming everyone has the extra cash to do so...they probably dont
Bragger
Someone PLEASE clarify. What does Ramsey mean by closing costs? Does he mean Total closing costs? Or do I exclude prepaid costs like homeowners insurance premium and property taxes to arrive at the closing costs (total - prepaids)? If someone knows please let me know. I'm not clear.
The closing costs are determined by the mortgage company offering the refinance they have a “fee” to close out your old mortgage and create the new lower one; they also in some cases have to re-create the escrow account and factors etc.
Watching this video talking about 3% rate in 2024. 😢 Rates are killing today!
So what is APR then? About to buy a house with a 2.99 interest rate but an APR is around the 3.5. Should I be doing the math with just apr ? First time buyer
Apr is interest rate plus fee's, closing costs and points
When your monthly payment can be lowered by $100 or more. Anything less than that isn’t worth it. Believe me, I’ve looked into it.
E W you are looking into it wrong. Even if your new payment is 50$ more but it cut down your term from 30yrs to 15yrs that’s a pretty good deal for me. Even if you dont plan to finish the mortgage and sell the house, being in a 15yr mortgage will give you more equity since more money goes into the principal compared to the 30yr mortgage. That’s why ramsey’s first word in this video is “its because youre looking at the payment”.
Monthly payment has nothing to do with it, in fact raising your monthly payment is usually good so long as your APR doesn't go up, because that means you pay off the house much faster and pay less interest
Can someone explain what term is in this context?
The word “term” in “term loan” means that the loan is repaid over time with regular payments. So a 15-year term means that the loans is going to be spread over a 15-year period.
Every month you’ll pay principal (the money of the loan) and interest (the cost of having the loan).
I'm still carrying the one.
If you recoup the closing costs in two years.
I did a 30 yr mortgage at a fixed rate of 6.4% and wonder if it's worth it to refinance, taking advantange of these really low rates since I've paid 15 yr of the mortgage. Closing cost is something I don't agree with but these rates are tempting to strongly consider a refi. Current principal balance is $79,000. Any advise.
How much is your house worth? Do you plan to stay there for several more years?
Funny that people call Dave when you know what he’s gonna say!!!
A 30 yr is much better with these low rates , leverage your money !
Why are you on this channel 😂😂
Mortgage banker here too... quite a bit of misinformation here.
Firstly, I agree that you probably shouldn't refinance unless rate improves by at least 0.5%. Secondly, mortgages don't typically stay on the books longer than 6 years (7 tops, typically).
But, you shouldn't just compare the rate and difference in payments. You should pay attention to the fees. If a refinance costs you $10,000 up front, then refinancing may not be worth it... even if your payments go down by a fair bit.
There are a lot of shady lenders that advertise great rates, but charge ridiculous fees to do the refinance. And that may be because they are attempting to price themselves out of a market due to volume.
Went from a 30 year 10/1 ARM at 3.875 (3 years into the loan) to a 2.625% 30 yr fixed. Paid 0.25 points on $350k loan ($875). Break even should be after 3/4 months
No Pre paids?
Everyone can’t afford a 15 year.
I wonder if he took into consideration the cost of doing the refinance. Banks don't process this paperwork for nothing you know. There's always a charge.
Did you watch the video at all?
Specifically when Dave asked what the total of the closing costs would be?
I'm trying to refinance to get a lower interest rate and they are saying i have to put a down payment to refinance? Is that normal?
$5K in fees? Way too high!
Better then I deserve 🙌
*than
Hi so funny thing I'm at a 3% 30 years .been in my home for about a year I would like to remove my PMI. I put 10% down in my house value went up I have a 20% Equity so what do you advise
Ally from Houston? New home? Unsure of future plans? Is this callers name Nick?