170k loan
(1) Credit Union: 4.325% with a 1% origination fee and another $300 for processing, so costs directly to credit union are $2,000 approximately.
(2) Mortgage broker: 4.50% with $1,425 of fees for the broker rolled into the loan.
Or doesn’t it make much difference? Thanks for your advice and knowledge.
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It can depend on how long you stay in the house.
The first option is better long term
Second option better for short term
Reasons: Option 1 costs more in fees, but the lower rate calcs to a lower monthly payment by around $15 a month (assuming fees are rolled in the new balance in both cases) It will take 38 months for that $15 a month to “pay for” the $575 in extra fees. From that point on, you are better off, so it’s better long term.
If you plan to move inside of that 38 months, option 2 would be better between the two, however, it may be better to not refinance at all in that case and avoid the fees altogether. You would need to compare option 2 with your current mortgage over various terms to see if you would really benefit with a refi.
Also, if you might move soon, it might also be better to do nothing. The fees to refi will eat up any savings on the lower rate if you end up moving. I am living this first hand. I refi-ed last year and dropped the rate from 5.75 to 4.875, lowered my payment by around $100. But it costs $2400 to do it in fees. So it takes 24 months at the new payment savings just pay off that $2400 in fees. I turns out I am looking at moving right now, so if I sell only 14 months later, I really paid $1000 for nothing.
Think it through.
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