How do I know if my mortgage refinancing terms are any good?

[cogden11]

Need some help figuring out what to do with our mortgage. We rushed in to getting a place with little down payment, but didn't do a physician loan.

We are fairly certain that we are going to stay in our place for at least next few years. We still have a huge amt of student loans (350k - 2.6-3.9%)

We went through the pre-approval process with SoFi. Our current loan is through Nationstar. What do you all think?

Current Mortgage (not the best)

• 4.125% 30 yr-fixed+


• Paying PMI -  $171/month - if we pay minimum payment it goes away in 2024.


• Current Loan amount is $366k


• Monthly payment $2482


• We initially purchased for around $400k 2 years ago, and now estimated value is about $475k

Refinance SoFi terms:

• 3.25% 15 yr fixed (30 yr was only going to get us down to 4%)


• No PMI


• Monthly payment $3400 (Principal&Interest $2573+Taxes, insurance $826)


• Cash to Close - $5376. (**Is this normal? Appropriate?)

We can certainly pay the extra $1000 in monthly payment, but is getting down to 3.25% and no PMI worth the increased payment, rather than using the money to pay off student loans, assuming we are maxing out our tax-deferred accounts?

 

 

[Drsan1]

I'm no expert but I have focused on my student loans as a priority over my mortgage. I always felt like the student loan would never g anywhere unless I payed it. So if something "bad" happens to myself, my husband, my kids, my mom that made me want to or need to decrease expenses I could always sell my house. With the student loan you are stuck. I would say keep your mortgage payment as low as possible and kill that student loan.

[jfoxcpacfp]

Yes, you will have closing costs on a refi and those look about right, but they definitely can vary if a bank is really hungry to get your business. There are many refinance calculators online that will help you analyze the numbers.

Bankrate (scroll down to the refi section)

Nerdwallet

realtor.com

Also consider, as Drsan1 alluded, that mortgage debt is superior to student loan debt (if debt can be described in a positive way). Interest from your mortgage is deductible while student loan debt for a physician is not.

This is not necessarily an "either-or" decision. Other factors may come into play, such as current cash flow management as it affects your ability to accomplish both (refi and telescoped timeframe to pay off your student loans). Financial planning would certainly help.

[Zaphod]

Why a 15 year? You have more liquidity and options with a 30 year.

[Craigy]

Zaphod wrote:

Why a 15 year? You have more liquidity and options with a 30 year.

Click to expand...

• 
  

  3.25% 15 yr fixed (30 yr was only going to get us down to 4%)

  
  

 

At this point in my life I'd probably choose 15 year to save the 0.75%.

[StarTrekDoc]

How about asking bank to remove PMI now that you're under 80% equity?

If you have high income, don't lose the deduction on mortgage, pay down the debt which has no tax benefits on interest.

Even better, ask the bank to remove PMI, then when done;  take our HELOC/fixed loan in chunks to payoff the student debt and move interest to a deductible state.   No reason to build equity in a home with existing non-deductible interest debt.

If you refi, best would be interest only mortgage IMHO

[hightower]

I would take the $900/month extra that you'd be paying towards the 15 year and $5300 in closing costs and use it to pay off your student loans before worrying about your current mortgage.  If you're not planning on staying there for the rest of your life, why are you worried about paying it off quickly with a 15 year mortgage?
Your effective rate on that mortgage, after tax savings are factored in, is probably in the neighborhood of 2.5%, yet you have $350k in student loans as high as 3.9%.  Get rid of your loans first!  They are costing you a lot more in interest and none of that interest is tax deductible.   When you're ready to move in a few years you can shop for a better mortgage on your new house and you'll probably get offered better terms based on the fact that your credit report will look better without all of those loans hanging over your head.
Good luck!  Keep us posted on what you decide

[jfoxcpacfp]

StarTrekDoc wrote:

How about asking bank to remove PMI now that you’re under 80% equity?

If you have high income, don’t lose the deduction on mortgage, pay down the debt which has no tax benefits on interest.

Even better, ask the bank to remove PMI, then when done;  take our HELOC/fixed loan in chunks to payoff the student debt and move interest to a deductible state.   No reason to build equity in a home with existing non-deductible interest debt.

If you refi, best would be interest only mortgage IMHO

Click to expand...

That's basically what @cogden11 is doing. Unfortunately, you have to go through the refi process to accomplish it. No free lunches

[The White Coat Investor]

I see no reason for a doc to ever pay PMI. Just dropping that usually makes a refinance worth it.

You can bring less cash to close if you accept a higher rate. Your choice- the lender makes the same amount of money either way.

If you stay in this house more than a few years, you'll be glad to have done this refinance.

[Sneezy]

cogden11 wrote:

We are fairly certain that we are going to stay in our place for at least next few years

Click to expand...

If there is a good change you will move after that few years, I'd consider an ARM.  Rates for a 5/1 or 7/1 are probably similar to the 15 year fixed but with 30 year amortization which will lower monthly costs and allow you to put more toward the student loans

Of course, rates could go up, but you are likely in position to deal with it, especially after other debt is gone

I'm guessing you may want to upgrade eventually