Refinance Mortgage

Question: Is it wise to refinance mortgage every few years?

(Posted by: bettiebee41 on 2009-11-17 18:48:24)

I was just thinking, our mortgage is $450k and we are paying a variable interest rate of 5.59 %. We are 3 years into a 30 year loan and have paid it down to $392k. Does it make sense to refinance the mortgage every few years, ie when it gets to say, $350k, refinance & go get a new loan for $350k because the monthly minimum repayments will be much lower, and then again at say, $250k, $150k etc etc. Obviously we would keep paying as much as we could afford per month (ie more than the minimum) and get it paid off quicker. I hope this question makes sense!

Posted by: Baby boy due March 7, 2010 on 2009-11-17, 18:55:06

Well yes it would be ok but if you get in the habit of paying the min. amount for the new refinanced amount you will keep paying that loan for longer than 30 years. Best thing to do if you refinance is to pay the same amount you were paying before. I would deff refinance into a fixed rate though so the mortgage company can't increase your rate.

Posted by: jlf on 2009-11-17, 19:01:47

No, it does not. It only makes sense to refi if it's going to save you money with a significantly lower interest rate or a shorter term loan.

Posted by: Sean Roberts on 2009-11-17, 19:28:19

When you pay a loan, the payments for the first 15 years are mostly interest. I doubt that you've paid it down to 329,000 in 3 years. You would need to make monthly payments of 5,150 Plus escrow. If you start a new loan, you'll have to pay loan origination fees. Then you'll start paying almost all interest again

Posted by: Jim L on 2009-11-17, 19:34:15

If you have a variable interest rate of 5.59% you are way, way better off trying to refinance into a fixed rate, 30 year or 20 year mortgage. You'll probably get a lower interest rate now, and not have to worry about your rate going up as it will in a few years in a variable rate mortgage. Interest rates are as low as they will ever be in your lifetime, so take advantage of them now. They won't be this low for more than another few months.