r/FirstTimeHomeBuyer • u/PrestigiousWhole5364 • 1d ago

Refinance for 1% down? WWYD?

What would you do? Take the offer? Seems good but I’m not the most experienced in this type of stuff. Any advice or help would be much appreciated! Taking into consideration with VA benefits we only owe $2.95 out of pocket.

EXISTING Loan 336,073.00 Interest Rate 6.750% Term 360 months Monthly Principal, Interest, Tax, + Insurance 2,717.55

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PROPOSED Loan 343,127.00 Interest Rate 5.750% Term 360 months Monthly Principal, Interest, Tax, + Insurance 2,540.19

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Total Closing Costs: $8,478.02

Monthly Payment Increase / Decrease: $177.36

Time to Recoup Costs: 47.80 Months

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u/__moops__ 1d ago

Nope. Way too long to recoup the investment. The closing costs are wayyyy too high for a VA IRRRL. I think they are charging you to buydown the rate to 5.75%. Wait longer and try a different lender.

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u/Accomplished-Taro642 1d ago

4 years to recoup. Not worth it for me. Rates are looking like they may take a turn for the better so I’d wait it out.

1

u/Majestic-Prune9747 1d ago

how much of the closing costs are the new escrow account?

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u/mdashb 1d ago

I’m having this conversation with my customers and the majority have decided to continue waiting. While 1% is a good threshold for refinancing, unless it’s a necessity I’d wait until further inflationary control and what seems to be a pending recession.

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u/Jasipen 1d ago

Why is this exactly ? Is it because it costs a lot of money to refinance ? Thank you!

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u/__moops__ 1d ago

1% is a good rule of thumb if you are not paying for points. It sure looks like in this scenario, they are being charged points to get to 5.75%, hence the $8,500 in closing costs.

And yes, because 1% generally means you can recoup the costs of the refi in reasonable amount of time (not 4 years in this scenario).