Good Day, Should I pay points on a refinance of an investment property/condo?
June 30, 2010 by
Filed under condo insurance quote
I currently own $141,000 and have a rate of 6.875% on a 30 year mortgage. I have owed the condo for 1.5 years and have been making principal payments of $100.00 each month. BAE mortgage quoted me 5.71 APR to refinance into a 30 year. If I wrap the closing costs into the load the new loan will be $145,900. I have been asked to pay closing costs of $4,422. Is this a good deal? Thank you.
141,190.00 Existing Liens to Be Paid Off $ 828.40 First Lien P&I
————- Debts to Be Paid Off ————- Second Lien P&I
$ 4,422.75 Estimated Closing Costs $ 146.62 Taxes
$ 1,476.05 Estimated Prepaid Items/Reserves ————- Hazard Insurance
————- Financed PMI/FHA/VA Funding Fee ————- Mortgage Insurance
————- No Cost HELOC Fees Paid By Lender ————- HOA Dues
————- Lender Credit ————- Other
$(145,900.00) New Base Financing
the closing costs seem a bit high. You mentioned a “new” loan at 5.71 APR, but that’s different than the monthly mortgage rate, so it’s difficult to figure your monthly savings. I’m guessing your new mortgage to be 5.5%, so you need to calculate your new payment amount (145,900) at 5.5%= approx 670/mo INTEREST, and you are currently paying on 141,000 @ 6.875% (approx 807/mo, interest). Taking the difference, you’ll be “saving” about 137/mo in interest (807 old mortgage minus 670 new mortgage interest=137/mo less in interest). Now you gotta divide what it costs you to get this new refi, ($4422.75) by that 137/mo savings and you get about 33 months to recapture your $4422 “cost”. So, if you are planning on staying in your place for another three years, then it is an “okay” deal, but if you are planning on moving in the next year or two, then no, it’s not a very good deal.
No. Don’t pay the points. Skip the refinance unless you can have it done for zero fees.