I have a friend who I think refinances his home every two weeks. I exaggerate, but just a little. I didn’t know how he does it without paying a ton of bank fees and appraisals and stuff like that. I know he avoids a lot of the fees by using a mutual lawyer friend for the closing.
I’ve been watching mortgage interest rates like a hawk lately. They were starting to tick upwards last month and rumors of interest rates going modestly higher were in high gear. I had started to think that I missed out on getting the best possible rate. However, I noticed that rates went back down an 1/8th of a point a couple of days ago. My forecasting tool at Bankrate didn’t seem to indicate things were going to continue any lower, so I locked in a refinance with the bank.
I’m slowly starting to catch up to my friend in the refinance game. Having completed a double HARP refinance less than six months ago, this refinance of our third property will complete our dealings with the mortgage underwriters for some time – I hope.
What did I gain by this refinance? We bought this property only a couple of years, when the rates were still quite cheap. In fact, that was one of the motivating factors behind the purchase. So unlike the HARP refinances where I was bringing a 6% interest rate to 3.5%, this is smaller deal. We’ll go from a 15-year fixed at 3.75% to a 15-year at 2.75%. (Somewhere my mother is reading that 2.75% interest rate and thinking back to the 80’s when rates could be 12%.)
What does that mean in terms of dollars and cents? We’ll go from a monthly principal and interest payment of $2327.12 to $1995.15. Simple math says that we’ll paying around $332/mo. less than before. That’s not bad for a few hours of work, right? Well, it’s not quite as good as it appears at first glance. Right now, we are a couple of years into the 15-year fixed mortgage that we have now… we have around 13 years of payments left. With the refinance we’ll take that balance and spread it back over the 15 years again. That’s a good chunk of the $332/mo. savings. However, the lower rate itself is responsible for a $130/mo. savings.
So in the end, we’ll get a little more financial flexibility in paying less each month, and we’ll save what amounts to a typical cable, phone, and internet bill these days.