Mortgage Question

Is it more economical to refinance, or pay off and borrow again, when trying to lock in a lower rate on a 30 year mortgage?



I'm not clear what you're asking. If you refinance any existing mortgages will be paid off by that refinance. 


I am wondering which way would be less expensive and would the rates on a 30 year refinance  be the same as a new mortgage?


When you refinance you are getting a new mortgage.  The old one is paid off as part of the transaction.


You are looking to get a lower rate on your current mortgage.  The way to do that is to refinance, which pays off the current mortgage and restarts your timeline. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance. The cost of refinancing is anywhere from 2% to 5% of the loan's principal, so you need to stay in your home a certain amount of time for the costs to break even.

Check out NerdWallet or DaveRamsey to run your figures to see if it's worth it. 


Is the cost of refinancing the same as the cost of a new mortgage?


rhw said:

Is the cost of refinancing the same as the cost of a new mortgage?

 I refinanced from a 30 year to a 15 year mortgage and got a great rate at Valley National.  The closing costs were only $499 and my rate was just over 3 percent.


rhw said:

Is the cost of refinancing the same as the cost of a new mortgage?

Yes. A re-fi is treated the same as a new mortgage. A new mortgage is treated the same as a re-fi.  ...

That means: new survey, title search, your credit, building inspection, proof of income and anything I might have forgotten.


If you use the same Title Insurer (Lawyer's Title, Stewart, First American, etc.), then you should receive a discount on the loan policy insuring the new lender.

To rhw: Have you asked your present mortgage holder if it would modify the interest rate?Some lenders will. That would save most costs of a refinance.


rhw said:

Is the cost of refinancing the same as the cost of a new mortgage?

The cost to refinance is slightly lower than a purchase transaction because there is a reissue rate on the title insurance. In general, all other fees are the same or similar. Until this past year, rates were slightly higher on a refinance because if the adverse market fee being charged. That has been done away with as of now. 
If anyone needs any help, please reach out. 
https://people.grarate.com/sarah-maloney-1036901



I guess we should have also asked, what is the balance on your current mortgage? Why do you want a 30 year instead of a 15? If you get a 30 yr, do you intend to double up on payments? What is your age? What is your current interest rate?


We used mammabear for our refi, and she got us a great rate. It was (relatively) painless, too. We also went from a 30 year to a 15 year with very little change in monthly payments. 



Formerlyjerseyjack et al. I would take the longest terms available no matter what age. If you want you always can pay a portion or all of the mortgage off early with no penalty. I would borrow the most I qualify for with payments I comfortably can afford. Although financially difficult for some to reconcile, the funds you borrow at todays historically low interest rates can/will be able to be invested and earn more elsewhere. For most even after taxes.

Obviously this strategy may not be for everyone but I firmly believe (know) it works.


90% -- maybe even 98% uf the time you would be right, and it also depends on what you invest in.

Good luck.


rhw said:
I would take the longest terms available no matter what age. If you want you always can pay a portion or all of the mortgage off early with no penalty. I would borrow the most I qualify for with payments I comfortably can afford. Although financially difficult for some to reconcile, the funds you borrow at todays historically low interest rates can/will be able to be invested and earn more elsewhere. 

When we refinanced last year, we faced that same conundrum and we firmly recalled what was happening 13 years ago. Almost have PTSD about it all since we relocated from Chicagoland in the fall of 2007 and there was a big difference in how suburban Chicago's housing market behaved compared to the market here. Values held up much better here.

Anyway, we'd been able to weather our misadventures over the years we've lived here and decided to take advantage of current low rates to knock off our mortgage faster. Little did we know we could have taken that extra cash we're putting towards the house and started day trading cryptocurrency. Alas.

Anyway, we just want to get out from under the mortgage so I guess achieving that goal of ending our major debt burden was more valuable to us than long-term investments outside our retirement accts.



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