Primary Residence Mortgage Refinance

[Michael Pritchett]

Hello,

My name is Michael and my wife and I live in a suburb of Nashville, TN. We bought our primary residence in March of 2020 and have a current 30 year fixed mortgage of roughly 386,000 dollars at an interest rate of 3.625% and monthly payment of 2,352/month which includes escrow. PMI is included in this as well. We are looking to refinance. My question is whether to go with the lowest rate (2.5% 30 year fixed and pay about 10,000 in fees/closing costs) and reduce the monthly payment by 260 dollars a month or go with a slightly higher rate at 2.75%-2.85% and pay 3-5,500 in fees/costs? We have no immediate plans to move but my thought with the lowest interest rate is if we do not break even by staying here another 4 years then we could potentially rent out the house. Thoughts?

Thank you for your time.

[Jason Wray]

Michael,

It is kind of tough without seeing a LE loan estimate.  But if your paying over a point and only reducing your rate by .25% that's a little steep.  If your talking about those fee's being points or originations costs that WAY to high!  Bank costs should not exceed $1200-1500.  Unless you are including your taxes/insurance-prepaids?

Regardless the margin reduced from 2.75 - 2.50bps is not going to save you enough to pay $10K.  A quarter point on a $386K loan is around $965 a year.  It would take you 10 years to recoup costs prior to saving....