Date: Mon, 05 Apr 2004 05:55:26 -0700
From: Andy 
Newsgroups: alt.invest.real-estate misc.consumers.frugal-living misc.consumers.house
Subject: Re: Refinancing cost comparison

J SKerry wrote:
> 
> ouch! what's your current interest rate?  Beware of lenders that roll 
> the cost of refinancing into your new mortgage balance.  If you can live 
> with paying 1/2% more on the current market rate, go with a no cost refi 
> .  It's not really free you pay 1/2% more interest, BFD, I went from 
> 7.62% to 6.5% no cost then 6.5% to 6.0% no cost.  Offered no cost for 
> 5.5% 2 weeks ago when the normal 30 year rate was 5.0%

It is not wise to just pay 1/2% more interest to avoid costs without 
crunching some numbers firts.

On a 15 year loan of $125,000 the difference in the monthly payment 
amount between 6.0% and 6.5% is $34/month.  The present value of 
$34/month over 15 years at 6% is $4,036.  The total undiscounted cash 
difference in payments is $6,131.  If this guy blindly followed your 
advice to pay an extra 1/2% to get a no-cost refi he would end up paying 
about $2,000 extra (in discounted terms) and $4,000 extra in 
undiscounted terms. Ouch!

Andy