Q: I purchased home in 1993 for $159,975 with a 30-year fixed rate at 6.75%. I currently have a VA loan with a balance of $123,834. I am considering a VA streamline refinance (no fees or appraisal). The new loan would be for $124,077 at 5.25% for 26 yrs/9mos. My current payment is $1,042 and my new payment would be $720. I am a 63 year old widow and am trying to scale back expenses. Should I refinance, considering that I'm into the principal repayment of my loan?
A: It can make good sense to refinance, but you'll need to make a decision as to what is more important: improved cash flow to the maximum possible or owning your home free and clear more quickly. Refinancing to a new longer term will mean the greatest improvement in cash flow, but does come at long-term expense, not to mention that you'll have a mortgage in place until you are some 90 years old.
If a streamline refinance is available with a 15 or 20-year term, you should be able to improve your cash-flow position to a fair degree without seriously increasing the long-term capitalized cost of owning your home. It should be noted you must have a second mortgage against your home, since your original mortgage from 1993 should be paid down well below the $124,077 you claim your new loan would be. Even so, using a 20-year term for your refinance would only extend the total payoff of your loans by perhaps two years, while your monthly payment would drop from $1,042 to $836 per month -- not as pronounced a drop, but sizable, nonetheless.
To compare and review refinancing scenarios and costs over time, you should use our Tri-Refi Calculator.
- What is a rate and term refinance?
Homeowners have a variety of reasons for refinancing and each reason can indicate that one refinance option or another makes the most sense.
- Are ten-year fixed-rate mortgages (FRM) available anywhere?
Sure! Virtually all lenders who sell product to Fannie Mae or Freddie Mac will be able to offer you mortgage with a 10-year term. However, interest rates are usually the same as the lender's 15-year offerings.
- Can I get copies of checks from a past refinance?
It's not going to be easy, that's for sure.
- Can I refinance an underwater ‘kiddie condo’?
If the home is underwater, HARP is really your only option.
- Will shopping around for a refinance affect my credit?
Credit bureaus usually treat multiple applications to different lenders as a single entry in your credit file.