When Does Refinancing Your Mortgage Make Sense?

DerekJohnson

https://www.youtube.com/watch?v=J4JLrR5Ic9U

pawz

Cliffs (using round numbers):

Only refi if getting 1+% discount off current interest rate.

If your interest rate goes from 4.5 to 3%, the savings is 1.5% per year.

On a 100k mortgage you should save $1500 per year on your finance charges.

You closing costs to refi should not exceed 3x the nominal yearly savings. 1500 x 3 = 4500.

In other words, you should break even on the cost to refi, with the interest rate savings, in 3 years or less.


Don't refi to change the 'term' of the loan (time to repay), that is a principle equation.



I love Dave Ramsey. If DR's finance strategy were an Aesop fable - the tortoise and the hare - he's optimized the strategy of the tortoise. The majority of Americans, who generally have limited financial acumen, should heed his advice.

I'm a fucking hare.

YellowSnow

pawz said:

Cliffs (using round numbers):

Only refi if getting 1+% discount off current interest rate.

If your interest rate goes from 4.5 to 3%, the savings is 1.5% per year.

On a 100k mortgage you should save $1500 per year on your finance charges.

You closing costs to refi should not exceed 3x the nominal yearly savings. 1500 x 3 = 4500.

In other words, you should break even on the cost to refi, with the interest rate savings, in 3 years or less.


Don't refi to change the 'term' of the loan (time to repay), that is a principle equation.



I love Dave Ramsey. If DR's finance strategy were an Aesop fable - the tortoise and the hare - he's optimized the strategy of the tortoise. The majority of Americans, who generally have limited financial acumen, should heed his advice.

I'm a fucking hare.

Ramsey says 25 percent of take home pay or less on housing. We were able to do that in Seattle only cause we bought in 2014. Not possible for most folks now.

UW_Doog_Bot

pawz said:

Cliffs (using round numbers):

Only refi if getting 1+% discount off current interest rate.

If your interest rate goes from 4.5 to 3%, the savings is 1.5% per year.

On a 100k mortgage you should save $1500 per year on your finance charges.

You closing costs to refi should not exceed 3x the nominal yearly savings. 1500 x 3 = 4500.

In other words, you should break even on the cost to refi, with the interest rate savings, in 3 years or less.


Don't refi to change the 'term' of the loan (time to repay), that is a principle equation.



I love Dave Ramsey. If DR's finance strategy were an Aesop fable - the tortoise and the hare - he's optimized the strategy of the tortoise. The majority of Americans, who generally have limited financial acumen, should heed his advice.

I'm a fucking hare.

Economis is a good major for more than just the career.

BleachedAnusDawg

YellowSnow said:

pawz said:

Cliffs (using round numbers):

Only refi if getting 1+% discount off current interest rate.

If your interest rate goes from 4.5 to 3%, the savings is 1.5% per year.

On a 100k mortgage you should save $1500 per year on your finance charges.

You closing costs to refi should not exceed 3x the nominal yearly savings. 1500 x 3 = 4500.

In other words, you should break even on the cost to refi, with the interest rate savings, in 3 years or less.


Don't refi to change the 'term' of the loan (time to repay), that is a principle equation.



I love Dave Ramsey. If DR's finance strategy were an Aesop fable - the tortoise and the hare - he's optimized the strategy of the tortoise. The majority of Americans, who generally have limited financial acumen, should heed his advice.

I'm a fucking hare.

Ramsey says 25 percent of take home pay or less on housing. We were able to do that in Seattle only cause we bought in 2014. Not possible for most folks now.

Median income in KC is around $95k right now. After taxes, figure $80k. With Ramsey's math he is saying that total mortgage costs should not exceed $1,666 per month. Even with 20% down - not doable for most people - that buys you a $375k house. In KC, $375k buys you - as of today on Redfin - a 1300 sq ft shit box in Federal Way on a mediocre lot.

I think he has great advice on getting out of debt and saving, but some of his stuff around cars and houses is based upon life in the 1950's.

Bob_C

pawz said:

Cliffs (using round numbers):

Only refi if getting 1+% discount off current interest rate.

If your interest rate goes from 4.5 to 3%, the savings is 1.5% per year.

On a 100k mortgage you should save $1500 per year on your finance charges.

You closing costs to refi should not exceed 3x the nominal yearly savings. 1500 x 3 = 4500.

In other words, you should break even on the cost to refi, with the interest rate savings, in 3 years or less.


Don't refi to change the 'term' of the loan (time to repay), that is a principle equation.



I love Dave Ramsey. If DR's finance strategy were an Aesop fable - the tortoise and the hare - he's optimized the strategy of the tortoise. The majority of Americans, who generally have limited financial acumen, should heed his advice.

I'm a fucking hare.

They bait you with the monthly payment thing, lots of dumb people fall for it. The monthly payment is probably resetting back to a 30 year mortgage when the loan you are refinancing has only 20 years left on it.

creepycoug

BleachedAnusDawg said:

YellowSnow said:

pawz said:

Cliffs (using round numbers):

Only refi if getting 1+% discount off current interest rate.

If your interest rate goes from 4.5 to 3%, the savings is 1.5% per year.

On a 100k mortgage you should save $1500 per year on your finance charges.

You closing costs to refi should not exceed 3x the nominal yearly savings. 1500 x 3 = 4500.

In other words, you should break even on the cost to refi, with the interest rate savings, in 3 years or less.


Don't refi to change the 'term' of the loan (time to repay), that is a principle equation.



I love Dave Ramsey. If DR's finance strategy were an Aesop fable - the tortoise and the hare - he's optimized the strategy of the tortoise. The majority of Americans, who generally have limited financial acumen, should heed his advice.

I'm a fucking hare.

Ramsey says 25 percent of take home pay or less on housing. We were able to do that in Seattle only cause we bought in 2014. Not possible for most folks now.

Median income in KC is around $95k right now. After taxes, figure $80k. With Ramsey's math he is saying that total mortgage costs should not exceed $1,666 per month. Even with 20% down - not doable for most people - that buys you a $375k house. In KC, $375k buys you - as of today on Redfin - a 1300 sq ft shit box in Federal Way on a mediocre lot.

I think he has great advice on getting out of debt and saving, but some of his stuff around cars and houses is based upon life in the 1950's.

I think that's a fair point. There is a bit of a lack of 'nothing risked, nothing gained" in his advice. So agreed. I've made a nice bit of money on Seattle real estate. At times, the moves were debatable in that I was leaving security and taking on incremental risk. It's always paid off.

creepycoug

Bob_C said:

pawz said:

Cliffs (using round numbers):

Only refi if getting 1+% discount off current interest rate.

If your interest rate goes from 4.5 to 3%, the savings is 1.5% per year.

On a 100k mortgage you should save $1500 per year on your finance charges.

You closing costs to refi should not exceed 3x the nominal yearly savings. 1500 x 3 = 4500.

In other words, you should break even on the cost to refi, with the interest rate savings, in 3 years or less.


Don't refi to change the 'term' of the loan (time to repay), that is a principle equation.



I love Dave Ramsey. If DR's finance strategy were an Aesop fable - the tortoise and the hare - he's optimized the strategy of the tortoise. The majority of Americans, who generally have limited financial acumen, should heed his advice.

I'm a fucking hare.

They bait you with the monthly payment thing, lots of dumb people fall for it. The monthly payment is probably resetting back to a 30 year mortgage when the loan you are refinancing has only 20 years left on it.

I ingore the capitalization. You can always re-fi or pay it off. Lower cap. means higher payments. To do that, I always insisted on really getting paid. I can have a 30 year cap table and double up on my monthly payments, effectively making it a 15-year pay off, which is what I did for years.

But one day the 15-year SO out bid the 30-year that it was compelling enough for me ... so compelling, in fact, that the difference in payments was minimal, and of course, I was immediately cutting into principal at a migh higher rate.

I shop for the best rate, period, because that is the real cost of mortgage financing. The term of the loan is something you can manage over time, and all else being equal, I'll take max flexibility. I accounted for things that didn't happen, like being unemployed, etc.

My house has been paid off for close to 8 years, so IDGAF about this anymore. But that's how I always shopped it.

Pitchfork51

BleachedAnusDawg said:

YellowSnow said:

pawz said:

Cliffs (using round numbers):

Only refi if getting 1+% discount off current interest rate.

If your interest rate goes from 4.5 to 3%, the savings is 1.5% per year.

On a 100k mortgage you should save $1500 per year on your finance charges.

You closing costs to refi should not exceed 3x the nominal yearly savings. 1500 x 3 = 4500.

In other words, you should break even on the cost to refi, with the interest rate savings, in 3 years or less.


Don't refi to change the 'term' of the loan (time to repay), that is a principle equation.



I love Dave Ramsey. If DR's finance strategy were an Aesop fable - the tortoise and the hare - he's optimized the strategy of the tortoise. The majority of Americans, who generally have limited financial acumen, should heed his advice.

I'm a fucking hare.

Ramsey says 25 percent of take home pay or less on housing. We were able to do that in Seattle only cause we bought in 2014. Not possible for most folks now.

Median income in KC is around $95k right now. After taxes, figure $80k. With Ramsey's math he is saying that total mortgage costs should not exceed $1,666 per month. Even with 20% down - not doable for most people - that buys you a $375k house. In KC, $375k buys you - as of today on Redfin - a 1300 sq ft shit box in Federal Way on a mediocre lot.

I think he has great advice on getting out of debt and saving, but some of his stuff around cars and houses is based upon life in the 1950's.

He's a boomer meme