Refinancing: How Sweet It Is
We’ve had a 6 percent 30-Year fixed mortgage since we bought our house in 2005. With rates at historic lows, we, like many people, started looking into refinancing earlier in the year, but had to put it on hold until we got tax extensions, and then returns, filed. When we spoke with the mortgage specialist…
We’ve had a 6 percent 30-Year fixed mortgage since we bought our house in 2005. With rates at historic lows, we, like many people, started looking into refinancing earlier in the year, but had to put it on hold until we got tax extensions, and then returns, filed. When we spoke with the mortgage specialist at Chase in February the conforming loan limit for a two-family house in Brooklyn was just south of $800,000. When we got on the phone yesterday morning we were pleased to learn that the conforming limit had recently been raised to $934,200; the single-family limit is $729,750. We were able to do a 90-day lock for a 1/4 point at 5 percent. Here’s where you have to start to question how low prices can really go: With rates where they are right now, you could, say, buy a $1.2 million house and lock in mortgage payments of $5,000 a month; assume you make $1,500 on your rental and you’re down to $3,500; throw in the tax breaks and you’re down to $2,500; add back in $1,000 a month for taxes and insurance and you’re back up to $3,500. $3,500 a month to own your own house in New York City and have, say, 2,400 square feet of living space for yourself (three out of four floors). The trickier part comes when you need to finance more than that $934,200. Have any readers gotten financing for significantly more than that recently? How did you structure it? We heard from Chase that HELOCs are quite hard to get right now?
metaphase, regarding your third point, have you seen a graph comparing the performance of the s&p over the last 10 years to that of a Brooklyn Townhouse over the last 10 years?
You would have saved a lot of dough having your cash stuck in a down payment.
Ironballs is right — if you don’t already own, it’s still a bad deal right now.
Mr. B is right to refi, but wrong to think it means the market is hitting bottom.
… sorry, I mean people who actually COULD benefit from What’s original point *will end up ignoring it*, just because he’s the one making it
I don’t know why The What has to undermine his own perfectly good argument by going ballistic.
He’s right; if you’ve already had a mortgage for a while, a lower rate is not in and of itself automatically good.
But others are also right, that if you use your lower rate to pay off more principal, you can save yourself a lot of money, even if you don’t live in the house for 30 years.
But What can’t stand to acknowledge that anyone else in the world can be anything but a “complete fucking retard,” so instead he totally ignores that point. And so people who actually COULD benefit from What’s original point, just because he’s the one making it.
Another reason I believe points matter is that on a multi-family house, the proportion of points paid which are allocated to rental units (i.e., 3/4 in an evenly divided owner occupied 4 family) are not deductible in the year of puchase but must be amortized over the life of the mortgage.
So you’re not getting a tax break on 3/4 of your points right away – which sucks. Check this with an accountant – maybe the rules have changed.
” If you think he’s wrong, use the numbers, put up a spreadsheet, and show us. It would be a public service.”
Oh no I’m done…
“What,
So Mr. B saves $12000/yr in mortgage payments. That’s more than $300k over the next 26 years. What is your calc. as to how much more interest he will pay over that time due to resetting the amortization schedule? How much is the $12k/yr likely to earn, invested conservatively, over 26 years? What will years 27-30 cost him?”
Build a Time Machine and go back to 2005 and start again. Time is equal to Money.
“Look at it from the banks perspective…In year 1 of a mortgage they get the same monthly payment as year 30. Obviously, in year 1, about 90% is interest and in year 30, about 10% is interest. Does that mean that they prefer year 1?? The answer is no. They are still getting the same interest rate in both years, but in year 1 you owe the bank alot more money.”
I would go into a long rant but, I will let this statement stand on it’s own. You know what would make me happy? Continue being a Debt Slave to the Plutocracy…
“What is past is past, not relevant. What is relevant if the fees it will cost you to refi versus the monthly savings (and how long you expect to collect these monthly savings, i.e. how long you plan on living there). In your case, a refi seems like an absolute no brainer”
Brownstoner this post will prove my thesis that the average American is fucking Brainwashed and is incapable of defending him/her self intellectually. This why The Plutocracy is robbing every body blind! Mathematics is a true science, there no falsehoods in it. Welcome to the Greater Depression fools..
The What
Someday this insanity is gonna end..
You did good Mr. B, sleep easy tonight.
🙂
Not to mention, right now it’s not hard to find a two or three bedroom garden duplex in prime Park Slope for $4000/mo. I saw one myself this week.
It makes much more sense to rent in the best neighborhood than (according to Brownstoner’s best case scenario hypothesis) pay $3500/mo to own in a fringe neighborhood further from subways, shopping, and Prospect Park.
Especially since buying into a falling market is nuts . . .
What needs some help with Excel. Perhaps a computer class at the local community college will help.
As DIBS said, the refi issue is purely a matter of fees versus decrease in monthly payments, especially if, as in Mr. B’s case, the UPB is roughly the same for the existing and new mortgages.