My son wants to know if refinancing is to his benefit based on the following:
Mortgage amount is 129K at 5.5% interest 30 yr fixed. His monthly payment now is $970. The refinance deal will be for 30 yr fixed at 5.2% and refinance charges (closing costs) are about $5K which will be added to the mortgage. So the new refinanced laon will be about $134K and the new monthly payment will be $919. We are not sure if this is a good deal. Thanks for your help.

I just remortgaged two rental properties and my mortgage broker told me that unless you can drop the interest rate by a whole percentage point it is probably not worth it to refinance.

Shirley

5.2% sounds high for a 30-year fixed rate mortgage. If his credit is good he should be able to get around 4.5%.

To determne whether it's worthwhile refinancing you need to know what his long-term plans are, and how much of his original loan has he paid down already. If he expects to stay in the house for a long time and build eqiuty, and if the original loan is already several years old (i.e. he has a lot less than 30 years left to pay it off), then I would say he is probably better off just lettting the old mortgage stay in force, as the total amount of interest left to pay on it may be less than on a new 30-year loan. But if his existing loan still has close to 30 years left on it, then it would seem to be a good move to refinance.

He is getting no where, he is saving 51 dollars a month but paying an additional 5000 dollars

So it is going to take about 10 years of payments to even make up the 50 dollar a month savings.

1. the 5000 closing for refi is way to high ( my opinion anyway)

2. not nearly enough interest savings.

I would assume he may not have perfect credit since the rate is still high in today's market place.

I agree with all, interest rate is not good and savings on payments is quickly offset, do not do it. However, shop around I have seen 30 yr. fixed for below 4.5% which is your target.