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December 1, 2008
Drop in interest rates--should I refi?
I have a 1 br. co-op in Clinton Hill which I bought last year, w/ a 30 yr. fixed at 6.5%. My mortgage broker just informed me this morning that rates are now at 5.375%. Wondering if it is worth it for me to refi? If the apt reappraises for $15K more than I bought it (listings for comp. apts in my building are above that right now so it is a strong possibility), then I can avoid closing costs and save a few hundred dollars a month. Wouldn't mind more $ in my pocket, esp. as I plan on having my apartment a few more years, not to mention that the economy is looking a bit dire these days... Any thoughts/advice out there? Thanks.
Comments
Yes, if you plan to stay there, figure out how much you will be saving each month, and how much money you will have to pay in fees to re-finance. Then determine the break even point. Usually it is worth it, if you plan to stay a few years.
Posted by: Bklyn born at December 1, 2008 5:57 PM
sounds like you should definitely re-fi to me. Amazing rates!
Posted by: gkw at December 1, 2008 6:00 PM
Crumpler, is the 5.375 rate is only good for a 30-year conforming loan? (not a agency-jumbo I would assume) Care to share which broker you used?
How does re-financing work exactly? If your property appraises for more than when you purchased, there are no closing costs?? thanks!
Posted by: helppls at December 1, 2008 8:23 PM
yeh I'm also interested how there are going to be no closing costs.....
I signed up with citi bank at 6.25% about 6 months ago so 5..375 is a great deal.
Would also be interested in your brokers email address :)
Cheers,
Dean
Posted by: deanc at December 1, 2008 10:20 PM
Manhattan Mortgage is offering this 5.3 rate now also.
I'm at 6.1 and my broker called last week to ask me if I wanted to refinance, but for me, the fees aren't worth the extra 80 bucks a month in my pocket.
Posted by: 11217 at December 2, 2008 11:21 AM
helpls and deanc -- I think the issue is that if your appraised value goes up, you can add closing costs to the mortgaged amount and finance them, rather than pay out of pocket. The banks all have their requirements as to the loan to value they require. For example, a bank may require the borrowed amount can't exceed 80% of the property's value, in which case if your existing mortgage was done at 80% of purchase price, you could only finance the closing costs if the property appraises for more than the purchase price. You are still paying the purchase price, just not out of pocket. Instead, it will eat into the amount you save monthly by refinancing.
Posted by: slopefarm at December 2, 2008 11:29 AM
Don't forget to include the mortgage recording tax in your calculations. Maybe you can finance it according to the preceding comments but that is still a chunk of money that you will never see again.
Posted by: supersleuth at December 2, 2008 1:08 PM
If you get a CEMA or Consolidation Extension Modification Agreement you only have to pay the MTG tax on the new money. I explained this a few months back but I'll explain quickly again.
If you are doing a "rate and term" refinance also known as a "no cash out" and you got a CEMA you would only pay the MTG tax on the "new money" or the closing costs that you roll into the loan. Example would be
Owe 500k + $4,000 closing costs you would only pay $72 in mortgage tax. New loan amount would be 504k.
If you were doing a cash out it still applys so lets say you owe 500k and want to take out 100k for improvements + $4,000 for closing costs. New loan amount would be 604k and you would pay $1,872 MTG tax on the 104k "new money"
Of course the caveats are that the existing bank will probably add a couple hundred dollars to the payoff for the paperwork to draw up the legal documents.
Posted by: Adam Dahill at December 2, 2008 1:31 PM
All largely depends on how long you plan to stay there. Since you're planning to fold your closing costs into this new mortgage, your new mortgage amount is going to be higher (but with lower interest the monthly payment is lower). Definitely pays over the longer term, but if you want to sell in two years you will find that you owe more money to the bank than you would had you stayed with your current mortgage. Without getting into every detail it sounds like this refi might pay off if you stay where you are for at least 4-5 years.
Posted by: heck_of_a_job_brownie at December 2, 2008 2:47 PM
I'd wait a bit. Rates should go lower.
Posted by: Petebklyn at December 2, 2008 2:53 PM
I believe that there is no mortgage recording tax on co-ops.
Posted by: Mikey at December 2, 2008 3:34 PM
No MTG tax on Coops and no title insurance either. Closing costs on Coops are ridiculously low. If I had a coop I would refi right now but alas I'm in a Condo and I'm already at a good rate in the mid 5's.
Keep your eyes peeled for jumbo rates starting Jan 1st.
Posted by: Adam Dahill at December 2, 2008 3:53 PM
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