Refinancing - Points vs No Points

72MachOne99GT

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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.
 
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9397SVTs

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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.
 

ford fanatic

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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.

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

72MachOne99GT

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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.
 

13COBRA

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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.
 

Twisted2v

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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.
 

nickf2005

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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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Junior00

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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.

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.
 

72MachOne99GT

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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
 

72MachOne99GT

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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.

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)

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%.

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.
 

Blk04L

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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.
 

nickf2005

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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
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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