Should we refinance?

Hello and thank you for your question. While the interest in a mortgage is considerably front load, in my opinion it still makes a lot of sense for you to consider a refinance. Especially with your current rate of 6.00%. In order to truly understand the benefit of your refinance, we would need to have a more detailed conversation. However I will do my best to answer your remaining questions. The cost of a mortgage is paid for in one of two ways, actual dollars (i.e. the $5k your broker proposed) and your interest rate vs the PAR rate (the rate not increase or decreased with fees). You can also have some combination of the two. In short, for a highly qualified borrower, $5k with a rate of 4.00% sounds a bit high. Secondly with your plan on moving in the next 2-3 years, I would not recommend looking at a 30YR fixed mortgage and instead a 5 or 7 yr fixed/ adjustable loan. This would bring your rate down to the 3.500% range and further increase the savings. Frankly you should be able to reduce your rate and payment significantly, and be able to do so at little to no costs. I would love to speak with you in more detail and can be reached at 949-478-FUND. In addition my website it www.ThinkJohnAJr.com. Sincerely, John.

Well as you can see by the above responses... the fees are high or the fees are in line?? no one here can know for sure unless they look at your complete quote... Most borrowers don't understand the difference between closing costs, fee's and impounds... you're in CA and taxes are high, and property insurance can also be high depending on where exactly the property is located... how many months of taxes and insurance are being impounded?? Of that $5K, how much are "Lender Fee's"... Unless someone can look at the complete picture, we just won't know.. But, again, based on CA property taxes, i think $5k in total costs (including impounds) is reasonable... and the rate is also in line... As far as should you or shouldn't you... I would say you should... either the fixed rate of 4% or the ARM rate of 3.5% as others suggested, are both good alternatives to what your paying now.. WilliamAcres.com

Its very simple formula divide the savings per month into the costs and find your break even point and go from there. And not enough info to say 5k is reasonable or not.

In a word NO! This is based on your premise of moving in the next 2-3 years, and assuming when you move, you sell. If you intend to keep the property as an investment (rental), then the answer would be different. Let's talk about your other options that may well be much smarter if you plan to sell in 2-3 years. Taking a 30 year fixed rate that costs $5,000 and saves $283 per month will take you 18 months to recoup your $5,000 investment. IF you sell in 24 months, you only saved about $1,865. And although it is true that $1,800 is nothing to sniff at, I don't think it is enough for your plans. If you were to instead look at a 5/1 ARM, the rate is fixed for the first 5 years at 2.625%. Now you would be looking at saving over $500 per month, not even 10 months to recoup the costs. Now if you sell in 2 years, you are $7,600 (12,600 less the costs).ahead. It may also be beneficial at looking at variations using lender paid fees. This means your rate would be higher, but no additional money is added to your loan balance. Ask your Mortgage Broker to work out these additional options for you. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

I agree with all these answers. Check what are Fee's and which are associated with the setup for your escrow account. If Currently escrowed you will receive a check back for your current escrow account. Also, you will always get to skip a month's payment when you refinance. Does this still make sense if you pocket the money from skipping a month and the escrow refund? What if you don't end up moving? Part of the 5k may be the fact that your mortgage "payoff" is always higher then the principal balance. It may be an incredible deal for you, it just needs to be analyzed further. You can contact me with any questions if you wish.

If I offered you approximately $700 tax free every month for the next 3 years when you move (which is more like getting an $880 monthly raise before taxes), would you be willing to accept it if it didn't cost you anything? Do you think your answer might be a resounding "yes?" I have a feeling it would. That's what we're talking about here. Based upon your loan's current $313K balance after 4 years at a 6% interest rate, unless you have made extra principal payments during that time, the original loan amount was about $331,000, and the monthly P&I payment $1,985. This payment can easily be lowered by $700/mo. using today's interest rates at no cost to you, so your loan's new balance will be the same as the old balance. What this means, is that you will save more than $25,000 over the next 3 years. The 4% loan quote you got with $5,000 in fees is absolutely outrageous in today's marketplace. You have been truly blessed by posting your question on this web site. Unfortunately, there are still too many loan officers today trying to hit "home runs" with every loan they write rather than looking out for their clients' best interests, including the one who gave you this quote. Give me a call 16/7, or email me, and I'll be happy to explain to you how I can structure this amazing loan for you. To learn more about me and our mortgage brokerage, which just so happens to be in your neck of the woods, click on my picture. When the next page pops up, click on "Website" and you will be redirected to ours. We work exclusively in CA and get loans done fast, typically in less than 30 days, at low interest rates and costs. Representing 39 quality lenders that offer more than 1,000 loan programs, we definitely have something for everybody. .

I'm not quite sure why you feel compelled to criticize other LOs' opinions on this web site, especially when they are well thought out and articulated intelligently. Please explain to me why, if an IR can be reduced from 6% to one low enough with a 5/1 ARM so that the homeowner doesn't have to pay any out-of-pocket costs for the new loan, resulting in a savings of at least $700/mo., it doesn't make absolutely perfect sense to do. Of course, any knowledgeable LO, and the majority of homeowners, know that accrued interest paid to the old lender, prepaid interest paid to the new lender, and money to fund a new impound account (if applicable) are not loan costs, so why are you causing confusion between the two? When a no cost loan is written, the new loan balance will be the same as old loan balance. What is it that you don't understand about this? Even if an impending move is only 2 years away, and the homeowner can save almost $17,000 during that time period, why would you advise against it if it costs $0 to do? What math are you using to determine that this isn't a wise decision to make? In addition, as far as you agreeing with Bert's opinion, if you read passed the "NO" you will have found that his thinking is in line with mine regarding a 5/1 ARM, except he was conservative in his estimation of the potential monthly savings, perhaps because the lenders that he works with don't offer as aggressive 5/1 ARM loan programs as our lenders do. Regarding a 30-year fixed rate loan at 4% costing $5K being in line with today's market, that is preposterous unless you are confusing loan costs with the loan expenses explained above, which, based upon what you wrote, seems to be correct. How could you possibly assume that the $5K was for the new escrow account? Perhaps it was, perhaps it wasn't. However, nothing in the question indicated this. If LOs don't differentiate between loan costs and required loan expenses, which are not loan costs, at the time they are quoting loans to their borrowers, they do them a tremendous disservice. This is a "rookie" mistake. When you quote your clients loan costs, Larry, do you not explain the difference between them and what they must pay for accrued and prepaid interest, and the money needed to fund their escrow accounts, if necessary, so they are not shocked by how much they will be required to pay at their loan closings? Based upon Friday's pricing, I could have easily written a no cost, 30F, $313K loan for this homeowner assuming a LTV of no more than 80%, a mid-FICO of 740 or greater, and all the other lender guidelines being met. In fact, this loan could have been written at less than no cost, that is, there would have been money left over after all "true" loan costs were paid to be used to pay a portion of accrued interest or prepaid interest or fund the escrow account. Quite frankly, your 2 cents opinion is worth just that. I strongly recommend you stick to doing loans in TX, and don't add to the perplexity that already exists in CA because of the abundance of unsavvy LOs still prevalent here. I thought the implementation of the NMLS vanquished these dopes from the mortgage loan industry. Obviously, that certainly isn't the case in CA, nor is it in other states across America.