Refinancing - Points vs No Points

I’ll keep it short-ish and to the point.

Wife and I have been in our home 4+ years.
Have a 3.75ish rate @ 30 years.
Owe 211,000
Valued at 300,000 when purchased.

We are looking at shrinking to a 15 or 20 year.

15 year mortgage at 2.75% is going to be roughly 1431 a month.

Is it worth it to buy a point ($2,100) for a 2.5% rate?

My math shows it paying for itself in roughly 84 months.

And I’ve seen nothing that adversely affects taxes.

SVT Mortgage Gurus?


Edit: Or maybe I have no clue what points even are.

Depends how long you're going to live there.

I'm not a mortgage guru.

However, if you can answer "yes" to these two questions, I think it would be worthwhile.

Are you paying cash for that point?

Do you reasonably believe that you'll be in the house more than 84 months?

If the 2.5% rate is for the 20 yr, pay the 15 yr rate with the difference of the two going to principal only. Obviously, you can pay more, but this ought to be the minimum.

9397SVTs said:

I'm not a mortgage guru.

However, if you can answer "yes" to these two questions, I think it would be worthwhile.

Are you paying cash for that point?

Do you reasonably believe that you'll be in the house more than 84 months?

If the 2.5% rate is for the 20 yr, pay the 15 yr rate with the difference of the two going to principal only. Obviously, you can pay more, but this ought to be the minimum.

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He needs time to make up closing costs too...

ford fanatic said:

He needs time to make up closing costs too...

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That's true. Best to pay cash and not roll it into the loan.

9397SVTs said:

That's true. Best to pay cash and not roll it into the loan.

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Unless it's a rental property and you pass the costs along to your tenants.

SlumLord Jeff

We would be paying cash up front.
And yea, my wife and I are only 35. So assuming she doesn’t murder or divorce me, we’ll be there quite awhile.

And yea, there would be closing costs, however I was just looking at the time to make up the points.

Securitas has a 2.05% 15 year loan, I’m going to talk to them next and see what that entails.

I just refinanced a month ago. I bought my house in 2016 and had a 3.625% rate. My mortgage was roughly $3,500/month for 30 years.

I refinanced at 2.875% and my mortgage dropped to $2,400. If I continue to pay the $3,500 a month, it pays off in 11 years, instead of 30.

Why not just pay down principal with the closing costs/money you would have paid for points?

Then pay extra principal every month but with the safety net of a lower payment of a 30yr loan.

We found value in paying for points to get a better rate. We have a 2.25% on a 15 year mortgage.

Even with closing costs, it made sense to refi October '19 (3.75% 30 year from 2015 build to 2.75% 15 year) and again May '20 (2.75 to 2.25).

The last refi amount was for $325,000 (roughly 52% value of home) though, so YMMV based on payoff balance.

We're in a really good equity spot 5 years in with no plan to leave. Home values makes it tough not to fish the market though, knowing we could have 300k in our pocket... but with nowhere to live!


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Twisted2v said:

Why not just pay down principal with the closing costs/money you would have paid for points?

Then pay extra principal every month but with the safety net of a lower payment of a 30yr loan.

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That’s about the beat suggestion, looking at the amortization schedule for both the current and proposed loan values and see where it lands. Having a cushion is always a good thing, especially right now with shit being so uncertain from one day to the next.

PhoenixM3 said:

Unless it's a rental property and you pass the costs along to your tenants.

SlumLord Jeff

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Biden doesn’t approve.

Your rental tax breaks are over sir.


“BLM is doing God’s work”
2KblackGT

svtperformance.com mobile app

There's never been a better time to refi, if you're going to stay in your home a while. We just saved about $100K in interest going from a 30 to 15 year lone and dropping 2%.

Talked to Securitas, and they're at a 2.375

For a point and 4/10s, or 2900 dollars, we can go down to 1.99%

Closing costs under 2500.

That’s looking awfully tempting.

My wife is hung up on the “points” and how there must be a negative to them, like strings attached or something. Anyone else here used them and have feedback?

@nickf2005

Junior00 said:

That’s about the beat suggestion, looking at the amortization schedule for both the current and proposed loan values and see where it lands. Having a cushion is always a good thing, especially right now with shit being so uncertain from one day to the next.

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We cut a 700 dollar truck payment this spring, and 500 a month on the Traverse will be gone this upcoming summer. I know Covid has buttplugged a lot of feelings of safety net but we are sitting okay. She’s in a Covid-proof field of work, and I’m pretty safe as long as trains don’t get outlawed.

(I could also liquidate the Shelby for about 40k if I had to as well)

ford fanatic said:

There's never been a better time to refi, if you're going to stay in your home a while. We just saved about $100K in interest going from a 30 to 15 year lone and dropping 2%.

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It’s made me sick looking at the interest/principal statements every month.

This would save us a huge chunk of the life of the loan.

I bought points on my first home. Don't remember any strings with them other than more upfront costs.

Didn't on my refinance on my current house. No closing costs and my rate is ~3 for 30 years. Don't plan on being here more than 3-5 years so didn't want to dump money in right now.
Saved me 300 bucks a month in interest.

72MachOne99GT said:

Talked to Securitas, and they're at a 2.375

For a point and 4/10s, or 2900 dollars, we can go down to 1.99%

Closing costs under 2500.

That’s looking awfully tempting.

My wife is hung up on the “points” and how there must be a negative to them, like strings attached or something. Anyone else here used them and have feedback?

@nickf2005

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I'm far from an expert, but the points are just bought with more money up front to get you a lower rate. My understanding is that as lomg as you're going to be in the house (aka mortgage) for a majority of the term, then it's a simple calculation.

$X to save additional Y percent.
Y percent of the mortgage amount equals $Z
If $Z is greater than $X, then you should do it.

I think that's how it works?

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How long has the refinancing been taking for everyone?

lOOKnGO said:

How long has the refinancing been taking for everyone?

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Dude I talked to yesterday said their closings were taking 30-45 days I think.

My lake house took 75ish days. They were doing 90 day rate locks for free.