Tuesday, February 3, 2009

To Refinance or Not To Refinance

OK. Mortgage interest rates are falling. Everyone is refinancing or at least trying to do it to benefit from the lower rates. So, I did a research myself as well. There were three distinct ways to do it. I'm describing them below.

No-Cost Refinancing Offer From My Current Mortgage Bank
The WaMu offered to reduce my mortgage by 0.25%, for no cost. The savings looked fabulous (down to $500's from almost $1200 a month), but after I looked at it carefully, it was primarily because they calculated as if for a new 15-years loan, while on my current loan I have only 10 years left. The actual savings would be only about $40 a month.

Best Deal I Was Able To Find on The Internet
I did a search for the best rates. The website (don't remember which one), took me into a lender search instead of giving me a rate. When I clicked the button that said Get Your Rate, I've got a list of lenders instead, and after 5 minutes (yes! even though it was Saturday night, around 8pm), my phone rang and one of the lenders from the list wanted to talk to me. So, in a way it worked smoothly. The thing is, that the best deal the lender had was a rate lower by 0.75% for a closing cost of some $4500. And, no, it wasn't because of my credit score. Mine is over 800, and it was him who checked and told me the score.

ING Direct EasyOrange Refinancing Deal
This deal is about a 5 year loan based on a 30-year period. So, I'd have to payback the whole loan after 5 years. But that wouldn't be a problem in our situation. Anyway, they're giving a rate of 4.75%, which is pretty good right now, for closing costs of $1750 only. Seemed a great deal. Just to make sure it makes even sense to refinance if we don't plan to live in this house more than 2-3 years, I went to timevalue.com website and compared my current mortgage with th EasyOrange deal. The image below shows the results:

It seems after all, that the EasyOrange doesn't save as any money after all.

That was it. I guess, the no-cost 0.25% is the best deal after all. But it will lock me for a year at least. What is rates go down a lot within months?