I'm back! Man things have been busy. I picked the absolute worst time to post for me because I write a weekly market update for a number of Realtors and Builders and I've been pecking at this issue for several weeks and suddenly everyone calls at the same time.
I've read thru the posts and there's been some good info. One piece of that bothers me is people keep talking about restarting your loan over at 30 years again. That's exactly what I was talking about that you need to challenge. At these rates you need to grab as much goodness as you can before the rates start to climb again.
Refinance for the SHORTEST term you can afford, don't go for the 30 year loan, go for 15-20 or even 25 years. You'll accrue much more payment equity, you'll get an even lower interest rate, and you can somewhat beat the new tougher qualifying standards since lower term loans have more liberal qualifying standards. You might not stay in your home long enough to pay it off, but when you do go to buy your next home at the much higher interest rates you'll be able to do a much smaller loan and therefore will not get hit as hard with the higher rates.
A refi is a new loan with all the same costs you had when you bought it. Well there are a few discounts, but they are minimal. If you do a shorter term your benefit isn't recapturing you closing costs thru a lower payment, it's building a much larger equity much sooner in the process due to the lower rate and the shorter term. As someone mentioned by owning vs. renting at retirement you can have a place to live without a payment (except for taxes and insurance).
Someone mentioned a Loan Mod. You've got to be very careful the new PC Loan Mod term refers to what is treated much like a foreclosure. A Cram Down is a better description of the modern day Loan Mod.
What the poster talked about was where his bank made him a loan and intended to keep it forever. The bank never packaged it for sale on the secondary market and therefore they would negotiate a streamline refinance and basically just lower the rate while charging for refiling and paperwork costs. THAT IS A VERY RARE SITUATION. Banking regs require the banks to keep most of their loans liquid which means they follow Fannie Mae and Freddie Mac guidelines and then you have to do a full refinance.
As far as homes being good or bad investments I'm in the camp they are neither they are EXCEPTIONAL investments. There's more to an investment other than just a dollar return. Throughout modern history a home has netted you more money than you put into it, but there's the intangible of being able to fix the house up as you'd like it to. There's that other intangible of being able to pay it off and live free - ya can't do that in a rental property. There's also the forced savings plan of the home that gives you the capital to buy the newer, bigger, prettier home that you'll want in 10 years. There's many sides to an investment.
