Primary Home Refinance using IRRRL

[David Cornett]

Given some basic numbers - is refinance recommended?

Original loan terms

30 years at 4.625%

Loan is 12 months old at this point

Refinance at 3.625%

Total cost to refinance is $6500

Currently a primary residence, but intent is to turn into rental in next 3 years.

[Scott Jensen]

What is the balance of the loan you are refinancing?

[David Cornett]

@Scott Jensen

$272,000

[Scott Jensen]

These are rough numbers but a percent decease in interest rate will save you about 1 percent of the balance per year. 2,700 in interest savings in year 1.

It costs you $6,500 and you will make that amount back plus more in 3 years. It definitely makes sense to do the refi.

[David Cornett]

@Scott Jensen thanks for your response, the statement I have based on actual numbers is 41 months to recoup.

I thought that was worth it, but I wasn’t sure what the “norm” is, or what other criteria have for assessing.

Thanks again!

[David Cornett]

@Scott Jensen

Update: now six months into the refinance. The lender reached out and as part of their “loyalty” program, I can refinance again, no fees upfront or rolled into the loan. However, in obviously refinancing into another 30 year loan.

I haven’t moved forward yet, but we are looking at going from 3.625% to 3 or 3.125%, does this make sense to go through with the refinance?

[David Cornett]

@Scott Jensen

https://www.clearpathlending.com/loyalty/

[Scott Jensen]

@David Cornett if there's no fees or closing costs I would take a 100 year loan at 3.125%. Obviously I don't know your situation, so I cannot provide specific advice, but this is as close to a free lunch as you get.