patrick.net

I would look at it from a return on investment perspective. How much it cost to refinance and how soon that investment can be returned? Anything less than 2 years is a go. 2-5 years depends, 5+ years is a no. A 300 difference in mortgage may in fact reduce 400 in interest so principle reduction is accelerated by lower interest rates as well.

Predicting where rates are headed and when is not productive to your current situation. If rates do go below 4% subsequently, then do the ROI analysis again.

7.125 to 5% is a delta of about 30%
5% to 4% is a delta of 25%. I would say unless your points are pretty high, refinance. Or pehaps you can look into no points, no/low fees loans, at 4.375% or so.

I understand you want to squeeze a little more value (by waiting for the perfect time) but you should consider locking in the savings now. Even without running any #'s, your ROI is proabbly around 1-2 years.

Any decisions should have this chart in reference

Is there any hurry, any reason rates would rise anytime soon?

No.

And if you hear otherwise, look at their predictions 1 or 2 years ago. Most people don't have a clue about how credit deflation works.

MarkInSF says

Is there any hurry, any reason rates would rise anytime soon?

No.
And if you hear otherwise, look at their predictions 1 or 2 years ago. Most people don’t have a clue about how credit deflation works.

most people weren't alive in 1930's

to most people, Japan's economy might as well not exist

most people would be happy if they got this truck out the mud and returned to the good ole roaring 90's, securities across the board rising in tandem, and personal lines of credit to infinity with perpetual roll-over to 0%.

me and the post office long for the days of my mailbox being attacked by the litter bug, with all that litter BALANCE TRANSFER 0% 12 MONTHS

errc says

to most people, Japan’s economy might as well not exist

errc says

truck out the mud

Truck in the mud. I like that. I can see the tire spinning now. It would be propelling the truck forward at 60mph, but there is no traction at all, so all it can really do it spatter a bit of mud. The credit hill is simply too steep now.

i should call the bank of Japan

2.50% for a 30 year

now that would be sweet

do they offer HELOC's as well?

MarkInSF says

errc says

truck out the mud

Truck in the mud. I like that. I can see the tire spinning now. It would be propelling the truck forward at 60mph, but there is no traction at all, so all it can really do it spatter a bit of mud. The credit hill is simply too steep now.

this truck ain't got no posi

we got one tire that's not moving and the other is spinning aimlessly out of control getting no grip

some people think it's more fun and less costly to spin your tires when they are wet, i guess they associate the wetness as lubrication. the reality is you are burning more rubber off the tire, so when it finally does grip it's all worn out. no burnouts in the rain

errc says

i should call the bank of Japan
2.50% for a 30 year
now that would be sweet
do they offer HELOC’s as well?

When I was in Japan I was working for a Japanese semi-independent subsidiary of a British company. ca. 1996 the parent company was getting capital constrained and somehow rooked us into fronting a loan for them due to our better access to easier funding. I was more naive at the time so didn't really grok what was going on but I think the capital conveyance was a bit irregular.

Come to think of it, outside of my Apple days every employer I've worked for has been in debt up to their eyeballs. HHHmmmm.

Troy says

Any decisions should have this chart in reference

3.5 - 4.0 % is looking more and more realistic in the USA.
Might as well can the mortgage deduction at that point.

yeah it'd only be worth $80/mo starting out for a $400,000 loan @ 3.5%.

$800,000 loan is ~$500/mo but why are we subsidizing million dollar homes ? ? ?

Sadly lower interest rates is only increasing the wealthy disparity between the rich and poor... The haves are able to refinance... and the have nots are stuck.

Personally i'm on the fence, but I have excellent credit, am in the market for a home.. but don't feel quite comfortable spending all my savings now on a downpayment and locking myself into a home i'm not gonna be happy in for 15 years. There are tons of places I'm positive my wife and I would be content in for 5 years... But our 10 year plan.. yard for children, good school districts ect. require more money than we want to spend. So, we'll wait and see...

Refinance into a 15 year which are sub 4% right now. You will pay a little more each month than your current 5% but the equity builds fast. You will lose some interest deduction, but interest deduction has always been a scam anyway. This would represent real savings as opposed to a couple hundred dollars a month that will just get spent anyway.

Here's another way to slice it. Chase (and I'm sure others) offer a 20 year. My 30 year payment at 5.125% is about that same as a 20 year at 4.5%. Depending on where you're at in your amortization schedule, this can allow you to knock a couple years off your mortgage with no payment shock...

Rates are clearly LOOKING to go lower and lower yet, NO RUSH I expect you will see those Japan style rates in USA say late 2011 (provided the Bond Vigilantes' don't feel the need to cause the rates to raise) If I were to ever barrow again (I will never ever barrow, or be a buyer / owner of a home) I would do a 15 year, at 2.75 in about a year.

You have to be careful when refinancing, I refinanced from a 6% mortgage to a 4.99% mortgage last year and because the equity dropped from 15% to 10% I had to pay higher PMI fees. While overall I did save money and got a lower mortgage payment, but I also added another 2 years of PMI bills. At $250 a month, it's not insignificant; I look forward to the last month I have to pay PMI. PMI works in 5% increments. So if you have 9.9% equity in your house, its still considered only 5% equity and billed as such when they are figuring out your PMI payments. So in short if the equity in your house has fallen below a certain level, you may find it very expensive to refinance and if you underwater, you can forget about it.

Actaully it's kinda funny, if you been paying on time every month with a bank, you can't refinance with the same bank for a lower rate or more favorable terms without some equity. You would think they would be happy to recast your mortgage rather than risk you defaulting.

PMI stands for Biggest Scam Ever. should be called BSE but i guess PMI works here in bizzaro world. Private mortgage insurance, about the only government regulation that the mortgage industry has remained constant in recognizing, is supposed to serve purpose to those that don't have a large enough down payment, they instead are forced to purchase private mortgage insurance, in case of default, and then what??

Tech-

Did you cash out? I don't follow how you lost equity otherwise...

tatupu70 says

Tech-
Did you cash out? I don’t follow how you lost equity otherwise…

my guess is re-appraised for the new mort, and/or rolled the costs into the new loan.

cvoc13 says

Rates are clearly LOOKING to go lower and lower yet, NO RUSH I expect you will see those Japan style rates in USA say late 2011 (provided the Bond Vigilantes’ don’t feel the need to cause the rates to raise) If I were to ever barrow again (I will never ever barrow, or be a buyer / owner of a home) I would do a 15 year, at 2.75 in about a year.

That's reckless thinking and devoid of anything useful.

errc, I can assure you that no one knows for sure where rate is headed and when. Put it this way, you can gamble and get more value by waiting or you take the winnings now.

As E-man pointed out, you can save 2K per year interest just going for a 4.5% no cost no fee loan, you can wait and hope for 4% no point no fee, in which case, you may be saving 2500 a year. Most posters here have no concept of risk and rewards. (why are you risking 2K to make 500?) If it does go down again, you can look into refinancing again. If the value is there to pay some points, I would consider that as well. Just do a calculation on the Return of investment.

I have been buying bonds since 2007 and profited tremendously, I can tell you, it is one heck of a bubble. It is just desparate to be sold not bought, don't bank on the facts that interest rate can go down. All it takes is one good employment report or other economic factors and bonds will be sold like no other.

SF ace says

errc, I can assure you that no one knows for sure where rate is headed and when. Put it this way, you can gamble and get more value by waiting or you take the winnings now.

See Troy's historical chart.

thomas.wong1986 says

SF ace says

errc, I can assure you that no one knows for sure where rate is headed and when. Put it this way, you can gamble and get more value by waiting or you take the winnings now.

See Troy’s historical chart.

it tells me to refinance on the way down, that's all. If it goes down, refinance again. The chart with 2011-2015 is blank. rates can go down further, but that is not how you play it.

Since you're a controller, do you renegotiate a contract now when you have a chance to save 1M dollars or hope to renogotiate later thinking it "could" be 1.5M later? I think this point proves useful to errc's situation.

SF Ace, reckless Wow a little strong, I was only giving an opinion in reply as that was what he asked for. But this is what the poster asked"

and I quote from his post (top of page).

"so what i’m looking for opinions on is, what is the likely hood of sub 4% rates? Is there any hurry, any reason rates would rise anytime soon?"

I see by the time of your post you to watch CNBC and everyone having offered their opinion as to ONE GOOD Employment report and the unwinding of the bond trade. (bubble I would not call it, lack of a good alt. is what what the bond trade has been. (coming friday, only issue it is not looking to be good, but it could be, and if it is that would but a bump in the road to lower rates, as most of the time the trade is not a straight line.)

"I see by the time of your post you to watch CNBC and everyone having offered their opinion as to ONE GOOD Employment report and the unwinding of the bond trade. (bubble I would not call it, lack of a good alt. is what what the bond trade has been. (coming friday, only issue it is not looking to be good, but it could be, and if it is that would but a bump in the road to lower rates, as most of the time the trade is not a straight line.)"

CNBC is not a source, but the point is well understood, there is tremendous downside risk in bonds vs. little upside. 9/10 clients are looking to sell, not buy now.

Now, errc is not holding bonds, he has a chance to fix his mortgage at 4%, instead of 5%. please explain a plausible scenario that makes buying 2.5% yielding 10-year Treasury, a good risk-reward bet.

SF are you a ...Pro?

yes, I am a CFA and in the financial services industry in an umbrella of companies that manages about 2T in assets. This sub is an investment management/services arm. I started in mergers and acquisition with an accounting firm.

Hello

SF

I figured, not too many that sound as well informed as you... Then please excuse the semi smart a$$ comment Re CNBC. I will check some of your posts, and see (if you have said, or better yet, if you would not mind, what is your outlook {Big Pic} ) if you care to share?

SF ace says

Since you’re a controller, do you renegotiate a contract now when you have a chance to save 1M dollars or hope to renogotiate later thinking it “could” be 1.5M later? I think this point proves useful to errc’s situation.

You will find debt is absent in many SV companies, so many dont deal with it.
For us interest rate changes are below "materiality" threshold to tinker with,
I have other things to fry during the day.

errc says

i should call the bank of Japan
2.50% for a 30 year
now that would be sweet
do they offer HELOC’s as well?

Japanese banks generally require huge downpayments / equity requirements, especially for non-japanese citizens, up to 30% downpayment.

tatupu70 says

Tech-
Did you cash out? I don’t follow how you lost equity otherwise…

It called a Market crash, perhaps you heard of it. I purchased the house for 400k in 2007 at 6% interest, 15% down payment (60k) and refinaced in 2009 at 4.99% interest. The original apprasial on 2007 was over 400k and the new appriasal was 380k for a 340k mortgage.

It's generally accepted that it's not worth refinancing unless you can shave off at least 1% off your interest rate. In my case I lowered the payments by $150 a month, I don't remember what the exact closing costs where but they were somewhere around 3k, so in two years I would have paid off the closing cost and come out ahead in the long run. Refinancing every time the interest rate drops 1/4 or 1/2 of a point really doesn't make sence. Than again when you looking at 600k+ mortgages, perhaps the math works more in your favor.

If i'm able to refi at 4% or under it's worth it to me; I am at 5% right now. I am planning on staying in my house long term so the $150-$200/mo savings from the 1% drop will be nice.

TechGromit says

It called a Market crash, perhaps you heard of it. I purchased the house for 400k in 2007 at 6% interest, 15% down payment (60k) and refinaced in 2009 at 4.99% interest. The original apprasial on 2007 was over 400k and the new appriasal was 380k for a 340k mortgage.

Yes--I think someone may have mentioned it here... After I wrote that post, I realized that was what had probably happened.

OCExRenter says

If i’m able to refi at 4% or under it’s worth it to me; I am at 5% right now. I am planning on staying in my house long term so the $150-$200/mo savings from the 1% drop will be nice.

while your overall mortgage may be 150-200 less, your interest is probably 200-260 less, making the principle reduction accelerated as well.

The point is don't just compare the mortgage, look into the interest and principle component as well.

SF ace says

OCExRenter says

If i’m able to refi at 4% or under it’s worth it to me; I am at 5% right now. I am planning on staying in my house long term so the $150-$200/mo savings from the 1% drop will be nice.

while your overall mortgage may be 150-200 less, your interest is probably 200-260 less, making the principle reduction accelerated as well.
The point is don’t just compare the mortgage, look into the interest and principle component as well.

The best part is I will keep paying what I currently am and pay it off even quicker (I pay bi-weekly)