Menu

Home › Forums › Housing › Am I refinancing too many times? Any reason why I shouldn’t refinance? › Each time you refinance, you

November 12, 2012 at 12:50 PM #754482
Coronita
Participant

Each time you refinance, you extend your loan by X months, with Y additional interest payments.

Example.. If you had a 30 year loan, but refinanced 6 months later. You have to restart your loan…Your original loan would have finished 6 months earlier.

To come out ahead

1)You refinance with a lower rate (keeping in mind you said 0 cost)….Though you extend your loan, you total payments end up lower because of the lower rate, you paid less total interest.

OR

2)You get an almost same rate loan but get a nice cash rebate IN TODAY’s dollar for refinancing, and that rebate is “better” than how much addition months of interest you pay by restarting your loan. For example, if refinancing puts $20000 cash in your wallet via rebate today but adds $24000 additional interest over the life of your loan (30 years)…It still might be worth it since the $20k today most likely will be worth a hell of a lot more than $24000 spread over 30 years (with the ever inflating dollar)… It would be your call…whether you value having $20k now ,or rather save $24k over 30 years.
Especially might worthwhile if you manage your money well and can grow that $20k you get now (versus spending it…Hopefully, you’re not like most americans).

If you are currently with a 3.875% loan, you better be getting a nice rebate if you refinance again to 3.875%. It’s something to consider if you’re on a 30year loan..Because most of your payments during the start of the loan go to interest and not principal…

Generally, I consider refinancing if rates are .25% lower than my previous.. I’m on a 15 year BTW so my payments take more out of the principal than the 30yr.