Got an Email from my Mortgage lady the other day. Apparently it's time for another refi. Rates are down to between 4.25% to 4.5% and she has a streamlined refi deal that won't even cost us any fees. Took me about 3 seconds to decide and I sent her a one word response - YES.

I think most women are amazingly smart about little things like using coupons and finding great clothing sales, but when it comes to big things like Mortgages that can save you some seriously huge money, we don't always get the memo. 

A quarter of a percent might not seem like a big deal, but I ran some numbers just for giggles.

   A $250,000 loan at 30 years with my current rate of 4.75%

       Monthly Payment $1,304

       Interest costs over the life of the loan $219,482.60

  A $250,000 loan at 30 years if I go down to 4.50%

       Monthly Payment $1,266 (saves me $456 per year - nothing to sneeze at)

       Interest costs over the life of the loan $206,016.78 - that's a smooth $13K savings

  A $250,000 loan at 30 years if I can get it down to 4.25%

       Monthly Payment $1,229 (not a huge reduction, but saves me $900 a year)

       Interest costs over the life of the loan $192,745.90 - now you're talking! $26K is a lot more than you'll save with coupons and 2 for 1 sales. 

  If I could manage the $500 per month bump to go to a 15 year mortgage, I would be saving a sweet $130K - that's almost half of the value of the whole loan, isn't it?  Still think that refinancing isn't a good idea???

PS:  Just putting in a plug here for bi-monthly payments.  They were a big hit for a while, but you don't hear much about them any more.  We use them for two reasons - it's easier to have half your house payment taken out of each paycheck than it is to arrange your finances to make one large payment at the first of the month.  Also, with the bi-monthly scheme, you end up making an extra house payment every year because you are making 26 half payments instead of 12 full ones.  That can make a big difference in the long run.  So can making additional payments towards your principle.  That's one thing we always intend to do, but it just never happens that way.  Maybe that needs to be my goal once I get some other debts paid off. 

There are other benefits to a refinance too - you generally get to miss a payment or two (my favorite part!) while they get the paperwork set up, and with some loans, you can also get cash out for home improvements.  I know the ads on TV show people getting home improvement loans to use for vacations, boats, and all sorts of other bullshit stuff, but my personal opinion is that you should only take money OUT of your house to put something INTO your house. 

Of course, every refi isn't a slam dunk.  If there are fees, and usually there are, you need to take into account how long you plan to stay in the house and whether or not it's a good deal for your situation.  I think the rule of thumb is that you need to plan to stay in the house for 2 or more years for every $2K in fees.  As a bank employee, I do get a bit of a break there, along with my fabulous free checking account - oh joy! 

But the flip side of the coin is that you are extending the life of your loan for additional years.  Not a smart move if you're getting a bit older.  That is one thing that concerns me - I could be about 80 years old by the time this house is paid off, and that's if we stay in this huge 6-bedroom house for that long - we love the extra room, but it wasn't the smartest choice for a couple with two half-grown kids.  If we'd stayed in the little house we bought when we first moved to Salt Lake, our house would be 3/4 paid off by now - hindsight is 20/20 they say....