“To Refinance or Not To Refinance?” That is the Question!

Whitney Sparks "A Fearless Heart"

Okay, let me just say before I get started that this is not a picture of our house.  Wish it were, but it’s not.

 

Actually I really enjoy our house, but I would just enjoy it more if it were paid off!  So, that’s where I’m at today.

 

We are trying to decide whether or not we should refinance our home and I’m looking for your financial advice.

 

Usually I give the advice, but today I want to hear from some of you to see what you think about refinancing a home.

 

WHAT IS REFINANCING?

 

I believe it’s just how it sounds.  You’re financing your house again.  It’s replacing the mortgage that is already on the home in hopes of getting a lower interest rate (in our case).

 

People who are under financial stress can also refinance in hopes of lowering their monthly payment.  We’re not concerned about our monthly payment at this point.

 

WHY WE WANT TO REFINANCE

 

As I stated earlier, we are just hoping to put more down on our principal.

 

When we bought this house we were drowning in debt and could barely cover our closing costs.  We did not put down the 20% so we are still paying PMI at this point.  Ouch!

 

We thought we were doing really good just to get a down payment.  Little did know that we were in way over our heads.

 

Anyways, that being said now we are ready to make things right!

 

OUR MORTGAGE

 

We currently have about $79,600 left on our home.  We are under a 30 year mortgage.  We are currently paying 6% interest.

 

What we would really like to do is lower that interest rate and put our note on a 15 year mortgage.

 

We currently pay our mortgage twice a month which allows us to pay an extra mortgage payment every year through the little bit of extra that we pay.

 

Here’s what we’re thinking…

 

What if we took out a loan for $85,000 to help cover the closing costs?

 

The credit union that we called today said that they could possibly get us an interest rate of 2.625% up to 2.75%.  This was better than we were hoping!  We were hoping for at least 3%.

 

Now, we were just talking over the phone and she just ran some numbers.  We’re not real sure of our credit score, but we have no other debts besides this mortgage so I’m hoping it’s going to look pretty good on her report.

 

She also told us that we would not have to put any money down unless we wanted to pay for closing costs (which is why we would be taking out $85K and not $79.6K).

 

Since we are currently making 2 payments/month we are also putting about $80 extra towards our loan.  The problem is that our interest exceeds our mortgage.  So, it seems like it is just barely chipping away at the loan.

 

MY CALCULATIONS

I found an online mortgage calculator to see if this was well worth it.  It said that with the extra $80 per month, 2.625% interest rate for $85K loan we could have our house paid for in 12 years with nothing extra.

 

That would be awesome!

 

So, what about you?  Are you looking into refinancing?

 

RELATED POSTS:

How Do I Know When I’m Ready To Buy a House

 

9 Comments on ““To Refinance or Not To Refinance?” That is the Question!”

  1. Whitney, when we were missionaries, our taxes were figured as though we were self-employed. You still draw a paycheck from the school system so you are still considered a full time teacher. When you do your taxes at the end of the year, that is when you will need to claim BOTH. You will still want to obviously report your financial coaching income on the loan, I would assume, because you are bringing income (which isn’t a bad thing) from both jobs. I believe the bank will look at your report for the report and not be too concerned with the employment aspect because you are still employed with the school. Look at me trying to give advice to the financial coach when we need coaching ourselves, LOL!

    1. No, that’s great! That’s the answer I was looking for. Thanks! It looks like your calling, along with being a pastor, could be as an aspiring financial coach!

  2. Under those circumstances, my question is why WOULDN”T you refinance your mortgage?

    Refi it into a 15 year mortgage and keep paying what you are paying. Even if you wrap the closing costs into you loan, you will still end up way way ahead.

    And your closing costs should be nowhere near $6000. We refinanced our primary residence and our two rental properties in the past year and in all three cases our closing costs were less than $3000.

    Refinance? Yes.

    1. I think that’s what we’ve decided. We thought we would “shop” around for a lower interest rate, but I’m not sure that it’s going to get much lower. Below 3% is better than what we expected. Do you think take out $85,000 to pay for closing costs?

Leave a Reply

Your email address will not be published. Required fields are marked *