Friday Question of the Day – Are Interest Rates So Low that you’d be Crazy not to Refinance (or Buy) Your House/Condo?

So I can’t believe these rates are still dropping – 30 year fixed rates have even fallen below 4%! Sorry I didn’t mean to sound like a commercial right there but since you’ve convinced me to get a flu shot, I’m wondering what you think about these insanely low interest rates? If you have a 30 year fixed rate at 5.6% would you definitely refinance? If you’re on the fence about buying a place would/should this make you expedite your decision?

So for the Friday Question of the Day – are interest rates so low that you’d be crazy not to refinance (or buy if you were thinking about buying)?

94 Comment

  • Im looking at refinancing right now to 3.875% with no points. Pretty incredible.

  • gotryit

    I am at 5.6, and I am taking steps to refinance. I would be crazy not to, to the tune of about $400 per month. Net positive outcome in less than a year, or less if I play my cards right.

  • So basically the question is “do you think rates are headed even lower?” since obviously the question of whether to refinance or not can’t accurately be answered by our baseless opinions. Just calculate the break even point of monthly savings v. up front cost and if you’re going to stay in the property for longer than the break even point then obviously you should do it…unless waiting will yield even lower rates.

    • Started off with 4.5 30 yr fixed. Looking to refi to 20 year @ 3.875. Saves about 100k in interest..ridiculous..any monthly payment goes up 280/month

      • We used google advisor and basically found the lowest closing costs. Refinanced from a 4.5 30-year, to a 3.375 15-year. Closed about three weeks ago.

        Super pleased. Plus you normally get to avoid a months of payments! Our total closing costs were ~1,600, and only that high because I had to be added to the title and that added extra fees and recordation through the city to add me to the title.

        We are paying about ~300 more per month, but about $700 more too principal. It is a nice feeling knowing every payment we make will chop 1k off of the principal.

        Older brother is looking at moving from an apartment in Ballston to buying a townhouse. At these rates I think he would be crazy not too.

  • Which banks are y’all refinancing from? Perhaps I should start looking…

  • I’ve been at 3.25% for a few years (15 yr mortgage) so I’m set.

    • Same here. Went from a 30 to a 15 at 3.25%: monthly payment went down and it’ll be paid off in time for the next real estate bubble, so I can foist this dump off on some gullible moron.

  • Just bought at 3.875%, 30 year fixed. Super psyched about this fact.

  • go to

  • In my case, the city will use the refi to bump up the house appraisal so the “savings” will go to closing costs and taxes. I thinking about it though.

    • How will a refi in crease your taxes on your house? The city doesn’t do the appraisal?

      • The city has access to all appraisals done for the purposes of sale or refinance, and they will up your assessment to the appraised value, minus any homestead deduction or 10% per annum cap, as soon as they can. But if you own your home, you are presumably itemizing your deductions, so the increase in real estate tax is written off against you federal income taxes, meaning generally a refiancing should still pay off at these rates.

        • I would like some verification of this. my dc property appraisal came in significantly lower than my bank appraisal when I bought it.

        • I just did some quick research and I think this is incorrect. The appraisal is a product you/your bank has purchased from the appraiser and it is confidential and private. It seems like it is a bit of an urban legend that jurisdictions access all of these and make property assessments based on them.

          • I played the refi game for years and there was a never bump up in my tax appraisal to the banks appraisal.

            Using this logic if the bank appraisal is low does the city lower your appraisal?

          • houseintherear

            Hmm this is a good question… the city used my original purchase price as the tax appraisal amount, so will they “catch wind” of the new appraisal amount somehow if it’s refinanced? Good to look into- I hadn’t even thought about this…

          • How are they going to catch wind of it? Are you going to subtly slide the appraisal towards them when you’re having coffee with OTR one day?

          • I worked for the Real Estate Assessment department of a nearby city government for a while, and when people appealed their city appraisals, they would often bring in private appraisals as evidence that the city overvalued their property. Every time somebody tried this, they would be told that commercial appraisals have no bearing on city appraisals. I wouldn’t put it past the city to have some hypocrisy if it made them more money, but at least in those cases I witnessed the city put no weight into commercial appraisals.

  • Can folks share recommendations for people they trust to contact re: refinancing without exhorbitant fees? Thanks!

    • Try Apex Home Loans. – 240-268-3057. I thought their fees were reasonable.
      Not sure what your definition of exorbitant is but I’ve found that the fees vary by the kind of loan you want. Sometimes a lower fee means a higher interest rate. The company has to make money too. Title insurance is one of the biggest cost items. One thing that can help you keep your fees down is to use the same title company you used for your mortgage (or last refinancing).
      In general, I think you’ll do better with mortgage companies like Apex than “brick and mortar” banks. The rates offered by banks at which I have accounts (including the one holding my current mortgage) were not that good, comparatively speaking.
      In terms of who not to recommend, I had an unproductive experience with Lending Tree. The guy I talked to kept pushing products with points on me, even after I specifically told him I did not want to pay any points.

  • I have a ridiculous amount of equity in my house and just want to hold on until retirement (7-10 years) and then I will sell. I am looking for interest only loans for refi…7 years @ 2.9…any others looking for Int Only?

  • When we bought our home in February we had trouble securing a loan– although we made more than enough to qualify, we didn’t have any credit history. We ended up having to take a 5-year ARM at 4.45% for a $620k loan. The plan was to refinance in a year or two when our credit was better established, but now it’s looking like a better time to go ahead and do it. We’re going to get advice from a profressional, but what do you guys think? Refinance now, with 7 months of history paying off a large loan, or wait until we have longer credit history but rates are likely to be higher?

    • Yes, totally. Don’t assume that these rates will be around in even 6 months, much less 2 years. You can easily move to a 30-yr 4% fixed-rate mortgage and not only save money but also provide surety 5 years from now when that ARM might move up by as much as 2 points.

  • just bought a condo in Philly, locked in our mortgage rate a few weekends ago for 4.125%. And then the rates drop!! We calculated it out and we aren’t losing that much with the drop that just happened, but I hope it doesn’t happen again! How long do you have to wait to refinance? Can it be a few months?? 😀

  • We are in the process of refinancing, and using our exiting mortgage broker. We have refinanced with them once already (1 year ago), and had our original mortgage with them. Like our last refinance, they will pay the closing costs, which as I understand it works out for them b/c they charge us a little higher interest rate. So, right now we are currently at 4.875% and it will go down to 4% (no points in either case.) our loan amount will stay the same and there are no closing costs. This seems good to me (I’m having them send me a version where I pay the closing costs, but I don’t expect the rate to be much lower.) So, basically other than doing a bunch of paperwork, our monthly payments will go down and that’s all. Is this weird or OK?

    • houseintherear

      I guess it’s just a matter of balancing what you’ve already paid. When you start the 30 yrs over again, you’ve essentially paid rent for the 1 or 2 or however many years you’ve owned. (This is all common sense, I know, but it’s something that totally slipped my mind when I thought of refinancing last year. For me, it didn’t end up helping me in the long run.)

      • That’s a little bit inaccurate. What’s happened is you’ve converted about 25% of your monthly housing expense into equity over the first 2 years. As we know, over time your monthly contribution increases from about 25% to 100% by the time you’ve almost paid off your mortgage.

        You should redo your math. For me, I’d save $400 off my PITI payments. Yes, it does reset the amortization clock — that is, if I only choose to make the minimum payments. If I were to pre-pay only $50/month (out of the $400 of savings), I’d still have the home paid off in a total of 30 years from the purchase date and paid less in interest.

        Most people should be applying a strategy like this. 1) Drop your monthly liability as low as possible to decrease risk associated with large, reoccurring debt. 2) Calibrate your monthly payment not according to what your mortgagee demands, but according to what your goals are — whether that’s to have the house paid off on your 60th birthday or to pay less in interest overall.

        • houseintherear

          Good point re: equity. I did the full math (with my accountant) last year when I considered refinancing, and it didn’t add up, but a super low rate could have its benefits. I have a 4.5% mortgage now, and rates were only around 4.3% when I considered a refi, so it wasn’t enough to pay off.

    • My understanding is that this is not unusual and the bank makes money off the new loan even though it’s a lower rate, as you suspect. Seems counterintuitive, but apparently it’s true (I refi’d a few months ago, also was wondering why it made sense for them.)

    • One other thing I’ve been figuring out since my post is that because I’ll be paying less interest, my tax write-off will decrease. Fortunately, the lower rate is just barely better enough so that it still is better for us to refinance. When the PMI goes away, it will be a much larger savings, if we are in our house that long (which is our plan.)

  • Has anybody refinanced FHA 30 year loan to a conventional 30 year loan? Is it even possible. My interest rate is 4.75 but I would love to lower it.

    • Yes, its absolutely possible. We just did it, except going from 30 FHA to 15 conventional. As long as your appraisal gives you 80% loan-value, you will be able to do it. Gets rid of the PMI if you are paying that as well.

      • You don’t need to get to 80% loan to value to switch to conventional, but you will have to pay PMI on the conventional, and your rate will probably be 1/8-1/4 of a point higher than the lowest depending on the equity you have.

        The conventional PMI premium is much lower than the FHA premium. Additionally, refinancing with FHA will restart the 5 year requirement on the PMI, where conventional just has a 2 year requirement.

        Ultimately when I did the calculations, my conventional refi at 4.25% came out about the same as 4.175% with FHA, but the conventional paid itself back much faster since the PMI dropped off earlier (and was half the price of FHA PMI).

    • Yep – I closed on a house last December with FHA 203k 30yr @ 4.75%. I’ll close on a refinance next week at 4.125% conventional 30 yr. We were also able to drop our PMI which was the real impetus for refinancing.
      It appeared that the underwriting process for a conventional 30 year was a lot more rigorous than for an FHA loan. Not sure if that’s the case across the board or just how it played out for me. Also, it’s worth noting that the Mortgage Insurance for a conventional loan was less than PMI under an FHA loan (just increased not too long ago – although we were grandfathered in). Even compared to the older (lower) PMI rates under an FHA, the conventional mortgage insurance was lower. Although, for us it’s a moot point since our appraisal came back high enough to drop the insurance all together.

    • We went from an FHA 30 to a conventional 15. We didn’t have quite 80% equity but it was close. Because you pay the principal down so much faster with a 15 we only have to pay it for a few months.

  • I have been thinking of buying for some time now, and it is now looking even more attractive with the current rates.

  • I’m a first time buyer looking for some advice on my options. Does anyone have a recommendation for realtors/mortgage brokers/etc that are good at working with first timers on the lower end of things? For reference, I make about $62K, so obviously my house budget is pretty constrained.

    • oh, i’m betting there will be lots of recommendations…

    • Well, lets see if you are in a position too in the first place.

      Banks first rule of thumb in qualifying someone is that they will max you out at35% of your gross income, meaning they will only give you a home loan if your total housing costs only cost you 35% or less of your gross income.

      35% of 62K is 21,700 a year. This amt would also include property tax and HOA fees if there are none.

      That means you can qualify for a max of $1,808 a month which would roughly support the mortgage on a 300K loan, which means you are buying a condo in DC, not a house, leaving ~400 a month for property tax/condo fees etc.

      Lastly, this 300K loan limit assumes 3 things. 1, you have atleast 5% to use as a down payment ($15,000), 2 you have no other monthly debt (student loans, car loans etc), and 3, you have a credit score of a minimum of 680. This leaves you with the means to (max) buy something that costs 315K.

      So before you try to squeeze yourself into homeownership you need to be sure you are fine with spending a max of 315K which severely limits both the size of the condo you are buying and the location you can buy in, AND if you want to be “house poor” to do it? I don’t know what you spend now a month on housing but ask yourself if you would be ok with spending $1,800 a month

      Only once you’ve answered those two questions should you try to find a realtor or broker because they will both tell you exactly what you “want” to hear, rather than what you need to hear.

      • +9565656565648121540103

      • I recently discovered it’s very difficult to secure a loan as a first-time homebuyer without putting down at least 20% (unless you do FHA).

        • Also, you need to figure out what closing costs might be like so you’re prepared to pay them. Our closing alone cost $30k (in most other states it would be more like $5k but DC has these crazy recordation fees).

          • Seriously? You think that on a 30k closing the recordation fees account for ~83% of the costs? really?

            Recordation (buyer pays) is 1.1% and transfer tax (seller pays) is 1.1% as well.

            To have a combined recordation and transfer tax of 25k the purchase price would need to be about 2.25 million. All other closing costs on a 2.25 million dollar house are FAR above 5,000.

          • “To have a combined recordation and transfer tax of 25k the purchase price would need to be about 2.25 million. All other closing costs on a 2.25 million dollar house are FAR above 5,000.”

            I’m sorry but that’s not true. For our $750k house we paid:

            $12k in origination charges
            $350 in appraisal fees
            $1.5k in owner’s title insurance
            $3k in seller’s title insurance
            $179 in recordation
            $11.5k in transfer taxes
            $300 for survey and pest inspection

            This adds up to something pretty close to $25k, but our purchase price was nowhere near $2.25 million.

            No idea what this would cost in VA but I don’t think it’s quite as high.

          • Oh wait, I just realized you’re only focusing on recordation and transfer taxes. I guess that’s a little less than half of the $25k figure for us.

        • If you don’t mind going through the long process of getting approved by NACA (, you can buy with no down payment (they’re legit, they’re a non-profit that has negotiated special agreements with major lenders).

    • 62K, You may qualify for first time homebuyer assistance trough DC’s HPAP program. We have similar income, I was able to afford a cute 1br btw U st and Dupont 🙂 Good luck!!

    • I am looking for similar advice, but for a condo, not a house as I make less than the above poster.

      • Honestly I don’t think the above poster can afford anything other than a small 1-bedroom condo anyway, unless he/she buys a house that needs a ton of work in a bad neighborhood (or something in PG or outside the Beltway).

        • Not necessarily…friend who makes less that the first poster scored a sweet 2br condo in Pleasant Plains. Used the DC HPAP program, worked with a great realtor, and secured an FHA loan. There’s a lot of programs out there to help out a first timer, and some really great realtors who know how to navigate the system. Denny Horner at Evers and Co. was my friend’s realtor, as well as mine when I bought my place four years ago. Strongly recommend.

        • yeah, absolutely no one here has bought in a bad neighborhood just so they could actually afford a house.

    • Hmmm… so I think a few of the above posters are offering good advice in the sense that when going into homeownership you should take a hard look at all of the costs before rushing into it.

      That said, I think they might be swinging a little too far in the other direction, like “OMG you only make $62,000?!? You need to keep renting!”

      You can definitely do it – for example, here’s a 1BR condo in Petworth listed for $199,000:

      The mortgage + condo fees + taxes on this property would probably be something someone could manage on a $62,000 salary.

      That said, just because you can do it doesn’t mean you should. You should think about how long you plan to be in the DC area, and how long you’d want to live in a small condo. If you think that would be less than 5 years, it makes more sense to keep renting. Plus, if you are early in your career and expect to have promotions/raises over the next few years, you will be able to afford something better, and something you could actually live in long-term, if you wait.

      Ok, I’m off my soapbox now 🙂

      • I agree completely. Also, it’s worth considering whether you could be married or in a serious relationship in a few years. I started thinking about home ownership two or three years out of college– I had a job that paid pretty well (probably around $62k, come to think of it), but was discouraged by how little I could afford. Around this time I met a wonderful woman, and a year into our relationship we started saving for a downpayment and looking at houses. A couple years later we were ready, both financially and emotionally, to buy. With our combined salaries we could buy a house that was exactly what we wanted and not have to cut corners; it’s a big commitment buying a house together, but the DC housing market is so difficult for single people.

        • Definitely, this is the other huge variable in the “Can I live in this small condo for 5+ years?” questions. If you think there’s a good chance you’ll end up getting married in that time, then maybe not (of course you could always rent it out but not everyone wants to do this).

        • The flip side of this is that while it’s entirely possible you might be married in x number of years, it’s also entirely possible that you won’t be.

          When I looked into refinancing circa 2004, I was a little wary of the closing costs. I also naively thought, “Maybe this isn’t worthwhile. I mean, in another three years or so, I might be married.”

          Well, it’s seven years later and I’m not married, and refinancing my place is no longer possible (long, complicated story).

          It doesn’t hurt to consider the possibility that you might get married, but personally, I’d advise proceeding so that you’ll be happy on your own. If you meet someone later, you can decide what you want to do then.

      • Actually, I think there should be more people trying to convince others “not” to buy. Everyone likes to simply “blame those nasty banks” (and they have a lot of culpability), but the entire reason we had a global depression, followed by a 3 year national recession was simply this : “Too many people who couldn’t really afford to buy a place and had no business getting loans, got them”.

        Thats it. You can watch CSPAN till your ears bleed and watch both sides of the aisle blame each other, but it doesn’t matter. It is that simple.

        Lets just look at this 200K place above.

        1. You have a downpayment of atleast 10K
        2. Mortgage at 4% (you better have awesome credit to get it) means your monthly payment is $915 a month.
        3. Add $100 a month in PMI because you don’t have 80% LTV
        4. Add the $100 a month property tax
        5. Add the $175 per month condo fee (which will continue to increase quickly as it is a 50 year old building.
        6. Add $20 a month for home owners insurance.
        7. Add in $75 a month for utilities (electricty/gas)

        So assuming you have decent credit and a minimum of $10K to put down, then you have a total monthly obligation of $1,385 (plus or minus $50 bucks). This is your best case, lowest cost scenario.

        Someone who is pulling 62K a year who lives in the District and who is putting 5% into his/her 401K is netting somewhere in the neighborhood of $46,500 a year after tax, or $1,780 per check, or ~$3500 a month in take home pay.

        So you’ve locked yourself into a serious financial obligation that you can’t walk away from like the end of a lease that costs you 40% or your monthly take home pay.

        If you pay for things like cable tv, internet, cell phones, car payments, student loans the situation gets worse.

        Then, what people never think about is the cost to sell.

        It costs 8% to sell the place. 6% to realtors and 2% to pay for settlement fees, transfer taxes etc so your place has to appreciate 8% in value before you sell, just for you to walk away from the settlement table even, not owing anyone any money.

        Signed, a homeowner and taxpayer who is really pissed that the barrier to home entry was done away with which resulted in me bailing out tens of millions of homeowners and their banks to the tune of 1 trillion plus dollars.

        • No, I actually agree with what you’re saying. I wouldn’t do it if I were the OP, but I wouldn’t say that just because you “only” make 62k you definitely should buy a place. There was definitely too much “everyone should buy!” mania during the bubble, but you don’t want to swing too far in the other direction.

      • Also remember you get the tax deduction!

        • It’s not worth very much to someone who has a $62,000 salary.

          • that’s not true at all – I bought my condo when I was making a GS-9 salary (moved to 11 around when I closed) and the tax returns helped me greatly. $265k condo that I put $20k in to – and the interest means I get basically all of my income taxes back. It’s very helpful.

    • Denny Horner @ Evers and Co. Bought my house with him four years ago, and friend who makes less than you just worked with him to get a 2 br condo in Pleasant Plains. Also, there’s a lot of programs to help out first time homebuyers wh aren’t rich. Don’t sell yourself short.

  • The mortgage on my 4 bedroom corner townhome is the same as renting a 2 bedroom english basement in my neighborhood. If you have a down payment and closing costs saved up, it’s a no brainer.

  • No, housing prices are going to fall big time once Uncle Sam starts cutting jobs and defense contracts. For those with a good down payment, be patient!

  • I’m trying to buy but DC is still a hot market and the low rates are not cooling things off. Properties go quickly. 15 offers on the last rowhouse I offered on. Came in second. Been looking a year and a half—3 offers and no success yet. I’m trying to be hopeful. I think I may have wind up with a condo rather than a row house.

    • It took us two years. Just be patient! Plus, the housing market always cools off starting around November.

    • It took us 6-9 months and 8 offers that we were out bid on! Lot os tears, but in the end we found a great house.

  • the nice thing about the low rates is the Fed’s willingness to commit to long term low rates. I almost jumped at 4.25 (only .5 savings over current), but realized there’s no hurry. I might swing < 4 from my current lender with whom I'd prefer to stay.

  • The one thing that makes me want to hold off is the possibility that the administration is going to roll out a refinancing program as stimulus:

    Depending on the shape of that, refinancing now could be flushing a couple ground away for nothing.

    Anyone else have thoughts on this?

    • I wouldnt hold my breath. I’m vehemently pro-obama, but I dont think this will ever happen. If it does, there will be many qualifying criteria.

  • PoP- to answer your question, if you have 5.6% you should definitely refinance. Dont try to time the market, but if you can get 1.6% reduction AND financing a much smaller amount, you’ll be saving hundreds. So, yes, maybe rates will go down, but they might go up too. You cant try to get the best rate you could ever imagine, just get the best one you can right now and go for it. If they edge down some, what if they hit 3.0? Its certainly possible.. but no one can predict it and who knows when it will happen, you could have already saved thousands by that time.

  • I would love to buy a place since we certainly pay more in rent than we would for a mortgage…unfortunately with the economy as it is and living in DC where the cost of living is what it is it’s incredibly difficult as a young person to afford rent and still manage to save for a down payment:(

  • I would say strike while the iron is hot. Even if rates keep dropping, there’s no guarantee you’ll actually get a rate that low. We tried to re-fi with our current lender and they TURNED US DOWN — even though we were already customers and had a long history with them. They say they required us to have 10% in cash reserves, which would have been almost $70,000. Get real! So we went with Lending Tree and got approved right away. We went from a 30-year FHA at 6.0% to a 30-year conventional at 4.3% and are now saving over $1000 a month! Couldn’t be happier.

    • If 10% is $70,000, you are looking at at $700,000 house. Even with a $50,000 down payment, that is over $3,800 a month. If you are following the “rent should be 1/3 of your income” rule, you are making almost $140,000 a year.

      If you are making over 11k every month and you can’t save $70,000, you are definitely doing it wrong. If $3,8000 is significantly more than 1/3 of your monthly income, you can’t afford a $700,000 house and your bank was right to turn you down.

      • Well, we’ve been doing some major renovations on the place, which is where most of our money has been going. But that’s alomost over now, so we’re definitely looking forward to the breathing room.

  • Is it worth is to refinance if I’m currently at 4.875? I refinanced about a year ago, but since have put about $60K into renovations. The property value has certainly increased (converted dead space into liveable), so I’m feeling confident that the appraisal will come in far above what we owe and give us that 20% equity cushion. It’s sounding very tempting…

    • I would lean towards saying it is absolutely worth it. If you can qualify and get a 4.00% mortgage, you are looking at saving quite a bit of money. Tough to say a yearly amount without knowing your mortgage principal balance, but to save a 1% a year, I would definitely say it is worth it.

  • My rule of thumb is that refinancing is worth it if you can knock a point off. We’ve refinance our house four times since we bought it in 1993 when our first rate was 7.68. Now we’re about to get 3.875 on a 30-year. Still worth it.

    • houseintherear

      That’s amazing, isn’t it? My parents are still cartwheeling over current rates. When they bought their first place in the early 70’s, they had a 9.5% interest rate (with perfect credit). Granted, their house cost about $25k…

      • That’s funny. Wonder what they’re payment is under today’s rates. Hopefully, this is the last time we’ll refinance and we can actually start paying off the house.

  • austindc

    With today’s gasoline prices, we can’t afford not to buy a pony.

  • Our current interest rate is 4.875% for a 30yr fixed. I called our bank today to see what we could get and they offered a 30yr at 4.375, a 20yr at 4.275 or a 15yr at 3.5%. Not sure if any of it would be worth it?? Each would be about $3000 – $4000 in closing costs.

    • Check out this page:

      google dot com/advisor/mortgages

      Can set up your specific circumstances, and sort by interest rate and closing costs etc. Think you can likely do quite a bit better than what your bank offered you. We went with a company based in Charlotte, and while our mortgage processor was based in Hawaii we believe, it worked out well.

      Not nearly as much hand holding as you would get with on of the big guys, but there really isn’t much to it. You fill out an application, you get approved, they send you a list of everything you need, and you send it all in. For ours, they actually sent the closing/notary to our house and we did closing in our living room.

  • for the earlier poster on a realtor rec …. me and my fiancee recently bought our first home here in DC (petworth/16th st hghts area) and we used Brandon Green and his team. He’s the effing’ man. He was awesome.

    it’s a fun time when you’re ready to buy, but as earlier posters have said, it requires a ton of patience. good luck!

  • ever feel like everybody has way more money that you?

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