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SFace
2010 Nov 22, 2:27am
"So they question is, is it worth it to continue to chase the refinancing train?"
It's actually pretty simple, what is the return on investment of the refinance. How much it cost and how long it takes to recover the cost net of tax, fees.
For me, anything less than 18 months is green, 18-36 months yellow and more than 36 months is red.
bubblesitter
2010 Nov 22, 2:40am
“So they question is, is it worth it to continue to chase the refinancing train?â€
It’s actually pretty simple, what is the return on investment of the refinance. How much it cost and how long it takes to recover the cost net of tax, fees.
For me, anything less than 18 months is green, 18-36 months yellow and more than 36 months is red.
So what you saying is you can refi every 18 months as many times u want? What is the thresold? I think if u do it so many times it defeats the purpose of owning(i mean paying off the sucker loan).
SFace
2010 Nov 22, 3:19am
No, what I am saying is if it costs me 1K to refinance and it takes less then 18 months to realize the savings on a 30 year mortgage, than the 1K is well spent. I don't speculate whether rates will go down further, you have to takes the savings in as they come as long as the risk make sense (Return on investment). The real world issue is whether the financing is available without putting in more $$ to secure the desired interest rate.
Paying off the loan is a separate issue than refincing, you can always accelerate the payment, borrow less or decide the best return on investment is paying off the entire loan. It is a separate issue. Net worth is a function of assets less liabilities, so if liabilites is going up but my assets are growing faster than the liabilities (because I pay less interest which flows to increased assets), it is increased in net equity and sound financial decision.
bubblesitter
2010 Nov 22, 4:37am
No, what I am saying is if it costs me 1K to refinance and it takes less then 18 months to realize the savings on a 30 year mortgage, than the 1K is well spent. I don’t speculate whether rates will go down further, you have to takes the savings in as they come as long as the risk make sense (Return on investment). The real world issue is whether the financing is available without putting in more $$ to secure the desired interest rate.
Paying off the loan is a separate issue than refincing, you can always accelerate the payment, borrow less or decide the best return on investment is paying off the entire loan. It is a separate issue. Net worth is a function of assets less liabilities, so if liabilites is going up but my assets are growing faster than the liabilities (because I pay less interest which flows to increased assets), it is increased in net equity and sound financial decision.
Thanks for the clarification.
During the housing bubble people were refinancing like crazy. They either take out a house equity loan or refinance there house and use there equity to take an even larger mortgage out. It wasn't that interest rates were any better, it was the values of houses were going up. Now we find ourselves in a slightly different situation. Houses are losing value, but the interest rates continue to drop. When I purchased my house in 2007 my interest rate was 6.25%, about 18 months later I refinanced to 4.99%, Rates have slipped even further since then, I've seen rates are low as 3.25%. Although higher PMI insurance rates do eat into some of the savings, as the equity left in your house decreases. So they question is, is it worth it to continue to chase the refinancing train? Fees and higher PMI rates do eat up some of your savings, but in the long run the savings are substancial.
#housing