From: Tyrese 
Newsgroups: alt.invest.real-estate misc.consumers.frugal-living misc.consumers.house
Subject: Re: Refinancing cost comparison
Date: Mon, 05 Apr 2004 12:01:40 -0400



xymergy@suds.com wrote:

> On Mon, 05 Apr 2004 05:55:26 -0700, Andy
>  wrote:
> 
> 
>>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!
> 
> 
> Thanks for posting this info, much appreciated and fully considered by
> me.

Your example is true if the loan is held to term.  If you sell or 
refinance in less than 15 years, no cost refi's can be the wiser choice.
With a no cost refi you start saving money on day 1, with cost refi, it 
typically takes 4-5 years before you break even