Mortgage Interest Rates

[gatorfast]

The rate spread between a 15yr and 30yr is so small right now I would personally just do the 30yr and pay some more each month if you want to pay it off sooner. At least then you have the flexibility to scale back if needed.

[DNYC1919]

I'm a manager at a mortgage company and I recently refinanced my coop in ny. My company doesn't do coops so I had a friend do it. I refied twice in the past 2 years. From 4.75 to 3.875 and now to 2.875 on 30 year. First time saved about 130 and now another 200. For me the coop is a long term hold as it's in a nice area and I plan to rent it out in a year or so when I buy a house in Long Island. Those costs recoup in a couple of years. If I was selling in 3 years or less it doesn't make sense.
But The time to refi would be now as rates may not be this low again for a while. Any sign of good news which really isn't real good news nowadays makes the stock market rally and rates increase. Someone mentioned 10 year bond over 1 % and that did push rates about .125 higher recently.

For majority of loans There will always be fees and some are more minimal. No such thing as no fees as there is always title costs, and getting a higher rate to offset that is usually not best move. But could be depending on the loan product / state/ loan amount. There are positive pricing Adjustments in some cases. But In most cases a minimal rate buydown will have you coming out ahead after a few years. My company doesn't charge underwriting or processing fees so we have some loans at true no cost where a lender credit can offset the title charges. Appraisal Waivers are also very common on Non cash out conventional loans nowadays.

15 vs 30 is a common scenario clients try to review. In most cases if you have been in the loan for only a couple years it's hard to go 15 and most people do not as 2.875 vs 2.125 is pretty close in terms or rate but large in payment difference. But clients that have 2.99 15 will take the lower 15. or clients that have been in a loan for say 8 years can go to a 15 and keep payments same.
Either way it's good time to Refi. Only down side is most lenders are 90 day turn times.

[David70]

Originally Posted by gatorfast

The rate spread between a 15yr and 30yr is so small right now I would personally just do the 30yr and pay some more each month if you want to pay it off sooner. At least then you have the flexibility to scale back if needed.

I looked at this and if you can swing the 15 year it still has additional benefits besides just the rate.

$300k at 3% - 30 year term and at the end of the first 12 payments you have spent $8900 in interest

$300k at 2.5% - 15 year term and at the end of first 12 payments you have spent $7300 in interest

You can add more money to the 30 year loan to reduce the balance to the same level as the 15 year but you can't do anything about the $1605 you lost to interest (some of this is the interest rate, some the issue of the term). As time goes on these differences get smaller but it is still money lost as a larger part of the 30 year loan payment is going towards interest. Even if they were the same rate the 30 year would have you behind some amount.

https://www.bankrate.com/calculators...alculator.aspx

[M-technik-3]

Just happened to see an article in Bloomberg saying mortgage rates are on the rise.

[Hawkeye]

Originally Posted by David70

I looked at this and if you can swing the 15 year it still has additional benefits besides just the rate.

$300k at 3% - 30 year term and at the end of the first 12 payments you have spent $8900 in interest

$300k at 2.5% - 15 year term and at the end of first 12 payments you have spent $7300 in interest

You can add more money to the 30 year loan to reduce the balance to the same level as the 15 year but you do anything about the $1605 you lost to interest (some of this is the interest, some the issue of the term). As time goes on these differences get smaller but it is still money lost as a larger part of the 30 year loan payment is going towards interest. Even if they were the same rate the 30 year would have you behind some amount.

https://www.bankrate.com/calculators...alculator.aspx

Yeah, that is the question. If I go 30y and make the same payment I would have had on the 15yr, I end up paying over $25k more in interest over the 15.7 years it takes to pay off the loan.

[TboneS54]

But if you invest the differential into stocks, you'll make much more than $25k in 15 years.

With rates this low, a 15 year is not worth it. Do a 30 yr and grow your stock portfolio simultaneously imo.

[Hawkeye]

Originally Posted by TboneS54

But if you invest the differential into stocks, you'll make much more than $25k in 15 years.

With rates this low, a 15 year is not worth it. Do a 30 yr and grow your stock portfolio simultaneously imo.

I would normally agree, but I really don't know what the next 5-10 years holds for America with what we have seen over the past year. I know that 15 years is long enough that it should correct anything if you look at historical trends, but we are seeing some pretty unique things happening with the world as of late. The market is really high right now anyway so I would probably just hold the excess and wait for the next mini recession

I have pretty much all of my retirement in equity otherwise it would be a no brainer, just thinking of some diversity, and I'm pretty sure I am going with the 15y after giving it a lot of thought and running some numbers.

[David70]

Originally Posted by TboneS54

But if you invest the differential into stocks, you'll make much more than $25k in 15 years.

With rates this low, a 15 year is not worth it. Do a 30 yr and grow your stock portfolio simultaneously imo.

You would likely come out ahead but things to consider

You are talking about a guaranteed return on the reduced interest to a higher risk return on the stock market (should happen but no guarantee). There's a reason people invest part of their money in less risky places than the stock market.

Whatever you make on the stock market gets reduced some amount with income taxes.

The 15 year payment is required, how likely are you to invest this extra and not spend part of it. For most I think the idea that they will save/invest what they always have, then always put this extra into savings is unlikely (when you want "X" you just skip the extra savings).

The mental side of it. I am now half way through my 15 year mortgage so 7.5 years to go. I am very happy I am not looking at 22.5 years left. I actually have about $100k left on my loan and while not the best investment I am considering paying it off sooner. At that point I wouldn't owe anyone anything and I like this idea a lot.

[TboneS54]

Who stays in a house for 30 years anyway?

[RickFLM4]

Originally Posted by TboneS54

Who stays in a house for 30 years anyway?

We are in year 19 and there’s a good chance we’ll be here 10+ more. It’s one thing to move for need (work, more space, etc.) but we decided to stay put before starting some renovations after looking around. Everything seemed more expensive and still required some level of renovations to go along with selling / moving costs.

[gatorfast]

Originally Posted by David70

I looked at this and if you can swing the 15 year it still has additional benefits besides just the rate.

$300k at 3% - 30 year term and at the end of the first 12 payments you have spent $8900 in interest

$300k at 2.5% - 15 year term and at the end of first 12 payments you have spent $7300 in interest

You can add more money to the 30 year loan to reduce the balance to the same level as the 15 year but you can't do anything about the $1605 you lost to interest (some of this is the interest rate, some the issue of the term). As time goes on these differences get smaller but it is still money lost as a larger part of the 30 year loan payment is going towards interest. Even if they were the same rate the 30 year would have you behind some amount.

https://www.bankrate.com/calculators...alculator.aspx

I'm not saying it's cheaper to do a 30 year over a 15. Obviously a much steeper amortization curve will yield less overall interest. But when the spread between a 15yr and 30yr note is less than 0.5% I would rather have the flexibility of the 30yr note which comes at only a small premium.

[vreihen16]

Originally Posted by Hawkeye

I have pretty much all of my retirement in equity otherwise it would be a no brainer, just thinking of some diversity, and I'm pretty sure I am going with the 15y after giving it a lot of thought and running some numbers.

I watched several of my retired racing buddies have to go back to work after the 2008 pop devastated their 401(k)'s and savings.

My logic is that I'm going to have a guaranteed house to live in free and clear by paying off the mortgage faster, even if it means that we're eating cat food on stale bread for three meals per day because my retirement and brokerage accounts take big hits. I've sorta gotten spoiled by having a roof over my head, and the insulation R-values of corrugated cardboard under a highway overpass does not a good home make.....

[TboneS54]

If they lost money in 08, then they would have made it all back and more in just a few years later.

Investing decisions should, ofc, be made with your age in mind. If you were of/near retirement age in 08, you shouldn't have lost as much (%) as a 25 year old investor should have.

Trying to make a 15yr loan work for you is smarter when interest rates are higher, not at rock bottom levels.

[RickFLM4]

Originally Posted by TboneS54

If they lost money in 08, then they would have made it all back and more in just a few years later.

Investing decisions should, ofc, be made with your age in mind. If you were of/near retirement age in 08, you shouldn't have lost as much (%) as a 25 year old investor should have.

Trying to make a 15yr loan work for you is smarter when interest rates are higher, not at rock bottom levels.

When one initially retires there should still be a fairly long horizon for much of their portfolio since they could live 20-30 years or longer. While it is easy to look back with hindsight and say they should have made up most of their paper losses over a few years, no one could be sure of the horizon at the time. So if faced with the prospect of having faith in longer term investments recovering fast enough to feel secure vs. getting back to work before aging much more, I can understand why some went back to work if their portfolios took big hits. Unless they liquidated investments that declined (hopefully not) they should have been able to re-retire again, but perhaps decided to restructure their portfolios to reduce risk which in turn resulted in working a little longer still.

[corn18]

The question of 30 year vs 15 year and pay it off early or keep it has been debated ad nauseam on multiple fora. There really isn't a wrong answer. It often comes down to emotions more than data. And that's ok. If you feel better paying it off faster at a lower rate, then that is good for you. We sold our house that was paid off and bought another house and could have paid cash for it from the proceeds. I went back and forth 1,000 times, but ended up with our 30 year fixed @ 2.75%. All the models show we would come out ahead due to inflation and better returns in our 60/40 portfolio. Sure worked out great because we sold the house in Mar 2020 and I put the proceeds into the market right after the COVID crash. Dang, that has worked out well. But I HATE HATE HATE having a mortgage again, so we may pay it off. Again, bad move according to the data, but this is more about my emotions than data.

And anyone that thinks they own a house free and clear has their head in the sand. My property taxes, insurance, maintenance and repairs run about $1500 / mo.

[bing240sx]

2.99% on my properties but the major Canadian banks are currently offering 5 year fixed at around 1.5% and even lower for variables.

[gatorfast]

Originally Posted by bing240sx

2.99% on my properties but the major Canadian banks are currently offering 5 year fixed at around 1.5% and even lower for variables.

When talking Canadian mortgages, I am assuming something like a 5 year fixed has the amortization profile of a 15-30 year note with a balloon right?

[bing240sx]

Originally Posted by gatorfast

When talking Canadian mortgages, I am assuming something like a 5 year fixed has the amortization profile of a 15-30 year note with a balloon right?

yes on the amortization but that's for the whole amount. you may be able to get someone to write one with a balloon, we can do that on some cars now but it's not commonly offered at the big banks that i've seen.

[David70]

Originally Posted by TboneS54

Who stays in a house for 30 years anyway?

What does that have to do with what is being talked about?

[Cyberdemon]

I considered refinancing last year but couldn't tell if the headache would be worth it, but looks like rates have gone down more since then.

I'm 4+ years into a 30 year with about $460k of $512k balance left @ 3.375%. I'm a bit nervous that my wife impulsively wants to leave NY (even though she has a pension so I'm not sure how realistic that goal of hers is). Does it make sense to try to refi? I still have a bit of PTSD from the paperwork the first time, but maybe the second time around I'll be a pro at it.

Does anyone recommend any lenders they've used? (I'm in NY, currently finance through PNC Bank)

[David70]

Originally Posted by Cyberdemon

I considered refinancing last year but couldn't tell if the headache would be worth it, but looks like rates have gone down more since then.

I'm 4+ years into a 30 year with about $460k of $512k balance left @ 3.375%. I'm a bit nervous that my wife impulsively wants to leave NY (even though she has a pension so I'm not sure how realistic that goal of hers is). Does it make sense to try to refi? I still have a bit of PTSD from the paperwork the first time, but maybe the second time around I'll be a pro at it.

Does anyone recommend any lenders they've used? (I'm in NY, currently finance through PNC Bank)

Comes down to how likely you are to be there long enough for it to pay off, the rate you can get and the costs to do it. Use one of the online calculators using one of todays rates and you can see how much you save per month which then tells you how long until you break even.

If you think it is likely you will be gone in a year I wouldn't bother, even for the savings. To the number above I would add a "hassle factor" to help decide on whether to do it or not.

[DNYC1919]

Originally Posted by Cyberdemon

I considered refinancing last year but couldn't tell if the headache would be worth it, but looks like rates have gone down more since then.

I'm 4+ years into a 30 year with about $460k of $512k balance left @ 3.375%. I'm a bit nervous that my wife impulsively wants to leave NY (even though she has a pension so I'm not sure how realistic that goal of hers is). Does it make sense to try to refi? I still have a bit of PTSD from the paperwork the first time, but maybe the second time around I'll be a pro at it.

Does anyone recommend any lenders they've used? (I'm in NY, currently finance through PNC Bank)

Originally Posted by Cyberdemon

I considered refinancing last year but couldn't tell if the headache would be worth it, but looks like rates have gone down more since then.

I'm 4+ years into a 30 year with about $460k of $512k balance left @ 3.375%. I'm a bit nervous that my wife impulsively wants to leave NY (even though she has a pension so I'm not sure how realistic that goal of hers is). Does it make sense to try to refi? I still have a bit of PTSD from the paperwork the first time, but maybe the second time around I'll be a pro at it.

Does anyone recommend any lenders they've used? (I'm in NY, currently finance through PNC Bank)

Ny is tough with refinance. Title fees and tax stamp is high. About 5-6k. If your in bouroughs then maybe do a cema but not worth it unless your in boroughs.

Rates up today again so it may be worth it but I would most likely think not. But again depends on your expectations etc.