Would you pay for a point for this HARP refinance?

[mcsangel2]

Help me decide if we should buy a point or not.

Bought 2005, 23 yrs left
1st mortgage - orginally $148,000 now $133,500
Rate 6.725% 30 year refiing to 3.5% 20 year

2nd mortgage will subordinate
orginally $37,000 now $23,800
15 yr balloon. A
Actual pmt is $261.88, but we have always paid another $125 each month, so that it will be paid off by the time the balloon is due before 2020.

So if we buy a point, ($1335), it will get us 3.25%. The 3.50 rate, in addition to shaving 3+ years off the term, makes our monthly payment $168 lower. I had wanted to get up to $200 lower. Buying a point will get it to $185 lower. The $1800 closing fee is rolled in to the loan.

Broker says if we buy a point, will take 80 months to break even. We are semi content here for the time being, but we would like a slightly bigger house someday. We are in AZ and are way underwater, so we defintely think it's going to be a while. Maybe even until 2019, when the second will be paid off.

Combined HHI is $85k. No kids, no ccs, no car pmt, no sl pmts.

The savings acct this would come out of has $13,500 in it. The quirk is that I had a stroke in August and the bills are just starting to come in. I dont' really know what I will be paying out of pocket. Just $2000 for in network, sure, but I'm *sure* there's going to be additional costs. Also, DH is having hernia surgery in Nov., and I'm sure we're going to have a couple thousand grand due too.

Point or no point?

[mcsangel2]

Aw, come on people. I need some feedback.

[jennysmitten]

I wouldn't. I just don't see how it would make that big of a difference.

[froggy76]

What is the rate on the second mortgage? Wouldn't it make more sense to throw another $1300 at that loan?

[LoveTrains]

I definitely wouldn't pay a point for that.

Also, I probably would consider just paying the $1800 straight out rather than rolling the closing costs into the loan.

[mcsangel2]

Oct 2, 2012 19:01:49 GMT -5 froggy76 said:

What is the rate on the second mortgage? Wouldn't it make more sense to throw another $1300 at that loan?

Wow, how did I not even think of that??? The rate on the second is heinous - 7.625%. Shit, I'm an idiot. I knew there was a good reason to ask about it here.

Also, we are still deciding whether or not to pay the fees up front or not.

[LoveTrains]

Yeah I think you need to determine if you can combine the mortgages into one. I don't know if that is possible, but that will probably save you the most money. I wouldn't be paying points, though, if you think you are going to move anytime soon. it's not worth it.

[80sjunkie]

Sounds like rolling the fees into loan would be a good move if you instead put that money toward the second mortgage (it is at over double the interest rate of the first mortgage). Sorry to hear about your stroke. I hope your recovery is going smoothly.

[lys]

I would not pay for a point in your situation - also I would not roll closing costs into the mortgage.

[80sjunkie]

First mortgage with closing costs rolled in: $784.63 a month, Total interest paid $53,220.47
Second mortgage, extra payment of $1800 (closing costs): $331.25 a month, new payoff Jan 2020. Total interest paid $6,669.51
Total interest paid $59889.98
VS.

First mortgage without closing costs rolled in: $774.25, Total interest paid $52,319.09
Second mortgage, no extra payment: $331.25 a month to be paid off Oct 2020. Total interest paid is $8,065.70
Total interest paid $60384.79

Second mortgage I used 8 years left, at 7.625 interest rate and assumed no extra payments for either calculation.

[cindilu1]

I had similar amounts and rates to you and I was about to refinance to an FHA 15 year loan and actually save $75 a month. With an FHA loan you only need 3.5% down. I know you said you are underwater but is this an option?

[mcsangel2]

I'm pretty sure the house is only worth $110,000-$125,000 right now, so I don't think so. We did look at a 15 yr refi also, but it is only about $40 less per month. Also I didn't want to consider the 15 yr because we don't want to stay in this house forever.

[Deleted]

If it were less than 3 years to make up the difference I would say do it, but 80 months? hell no.