Question

Someone please help?  Ok so June of 2019 my husband and I bought our first home.Someone please help? Ok so June of 2019 my husband and I bought our first home. We are currently paying an interest rate of 4. 75% but we also have a grant for $4800 (it was our down payment - we essentially were not looking to BUY our home - but we ended up having no options) so in 7 years this grant is wiped away - we don’t pay on it - our loan just has to remain in good standing with our mortgage company. We have the opportunity to refinance the house with 3. 125% in June as well as having our mortgage payment potentially lowered by $150 (that’s an extra $150 a month we can pay on the interest and pay off the house faster. Here is the catch, if we refinance the house in June at the lower interest rate, then that grant is rolled into our new mortgage because with this grant we can’t refinance the house for 4 years with this grant.  

Answer 1

How big is the original loan? If over 200k, I would roll the $4800 in. You’re saving over $50k over the life of a 30year loan.  

Comments

@ahoy98 I’m sorry yes I missed sharing that, the original loan was $159k

Answer 2

Kumiko just did a blog post on this that I read on The Budget Mom Facebook page about whether or not to refinance! If you’re planning on staying in the house, then refinancing is probably a great decision. When you refinance, like you said, there are closing costs all over again so it usually puts your loan back at a higher starting point. But with lower interest, over time it’ll be totally worth it! We had the opportunity to refinance, but due to relocating have to sell our house within the next year so we said, NO. because it’s bump our loan back up like 8, 000, so when we went to sell, we’d possibly not even break even. Lol so it just depends on your circumstances. But If the loan is only going up 4500 and you plan on staying in the home for the long haul, a lower interest rate and refinancing will eventually save you so much money!  

Answer 3

We are looking at doing a refi as well right now. If you do and that grant gets rolled in, that makes it a $4800 loan rather than a grant. Without knowing all your numbers, I would suggest you use an amortization schedule with your budget and figure out if you could make extra principal payments to cut down the total interest instead of paying a fee and losing that grant.  

Answer 4

Calculate out how much you’ll save with the refinance and and find the break even point. Putting the numbers in black and white always helps me.  

Answer 5

My guess is the grant is going to be more savings than the lowered interest savings, against the cost to refi.