We’re Going to Refinance Our Home Loan

It was finally too much for me to ignore.  We have been paying 5.75% on our mortgage for the last 6 years.  We’ve always felt that was a great rate, especially when you consider historical rates.  Well, the appeal of a sub 5% loan was finally too much to keep me on the sidelines.  We were able to secure a new loan at 4.875% for a 30 year fixed rate loan through our credit union.

I went back and forth on this for quite some time.  On the one hand, we really didn’t want to extend our loan back out to 30 years.  On the other, we know that we can pay additional on the mortgage to speed it up.  That’s what we plan to do.  We will take the savings each month and pay it towards the mortgage (and probably more) to keep paying it down as if we had the higher payment.  Over time, this will help shorten the loan period for us.

One of the other things that played in to our decision was that the lower payment will be very helpful if we were to find ourselves unemployed.  As it stands now, with both of us employed, 51% of our income is left over at the end of the month if we closely follow our budget.  If you include what we are putting away each month in our 401K’s and investments, the number is much higher.  This decision will help us keep our monthly expenses as low as possible.

Last week I was amazed that rates had gotten so low.  As I was logging in to my credit union website I happened to notice that they were offering an APR of 4.99% last week.  I didn’t act on it right away because I wasn’t sure it was something we wanted to do.  As I debated the pros and cons, I finally decided it made sense.  The benefits far outweigh the closing costs in a very short amount of time.

Once I decided that we were going to do it, I sent an email to a mortgage broker that happens to live in our neighborhood.  I gave him the basics of what we wanted to do and asked him to send me a Good Faith Estimate  (GFE).  His GFE showed a fair amount of fees that I wasn’t too thrilled with.  I also went through the basic process with my credit union online and downloaded the GFE for them as well.  When I compared the two, I found that my credit union was about $800 cheaper.  The other thing that drove me to my credit union was that my neighbor was quoting rates from Countrywide.  I have to admit, I found myself having a negative taste in my mouth from all the news I’ve heard about Countrywide.  In the end I decided that I wanted the convenience and peace of mind of doing business with my credit union (they service all of their loans).  The $800 definitely was a factor as well.

If you have a rate that is 5.75% or higher, you may want to look in to whether refinancing would be a benefit for you or not.