Pick my refi :)

[fryjack2]

We are refinancing our jumbo loan even though we did so a year ago, but debating doing a cash out (same amount regardless of loan).  Payments for all options are fine.   This is not our forever house, but we will probably be in it for the next 10-15 years unless we move within the same town.  All are for a 30 year fixed refi. Options are:

Option 1. With broker we used last year so no closing costs.  3.00%.  Same rate we have now.  

Option 2. New broker (thanks RockNVoll) can offer 2.875%, 3k credit towards closing costs which look to be about 5k, so 2k out of pocket. 

Option 3. New broker other offer of 2.75% but spending 3k to buy down a quarter point and closing costs are not covered.  So about 8k out of pocket. 



Which refi would you choose? 

[ohgillian]

Do all three of them have the same amount of cash out? Sorry if that is a basic question, but I haven’t done a cash out before, so I don’t know if the amount might vary across the options.

[fryjack2]

Aug 12, 2021 19:39:30 GMT -5 ohgillian said:

Do all three of them have the same amount of cash out? Sorry if that is a basic question, but I haven’t done a cash out before, so I don’t know if the amount might vary across the options.

Yes

[ohgillian]

Without actually running an amortization spreadsheet, I’m thinking Option 1. The others don’t seem like the rates are lower enough to offset those closing costs. I like the no OOP option.

[noodleoo]

Have you run a refi calculator to see what the break even point and total interest is on each scenario? The interest rate difference isn’t huge, but depending on the size of your loan and if you actually will stay there 10+ years, it could be worth paying more for the lower rate. I’ve done the calcs with each refi I’ve done and in the beginning (when the principal balance was higher), we paid more for a lower rate because we would save so much in interest. Our most recent refi, we did no closing costs for a higher rate because it wasn’t worth paying $3K now because the difference in interest wasn’t that much, so the rate difference didn’t matter as much (it was only 0.125% diff).

[RockNVoll]

Out of curiosity, does the option offered by the banker I sent you to include escrowing T&I?  Because I think the credit he offered you is a good bit higher than what he offered us!

How long will it take to break even on Options 2 and 3?

[fryjack2]

RockNVoll No, the options do not include T&I.

And break even would be a few years ( 3ish)  since the monthly payment drops by about $100. 

[fryjack2]

noodleoo, If we are in this home for another 15 years, we would pay about 18k more in interest over that time with the 3.0% loan than the 2.875% one. If we say closing costs will be about 4k, I think we can make more by investing that 4k into the market than the 18k we would save on interest.

Hmmm. Maybe we should stick to the 3% loan. Would be less hassle and headaches in terms of paperwork.

[numbers]

I'm a spreadsheet nerd so I'd make amortization schedules for all 3 to compare before choosing.