Does my lender not want me to refinance to a 15 yr?

Private Lending & Conventional Mortgage Advice
8yFollow

Does my lender not want me to refinance to a 15 yr?

Paul W.
Gilbert, AZ · Member since 2016 · 15 posts · 5 votes
I have a rental that used to be my primary residence. When we moved we refinanced to a 30 year. 4.75, non primary residence loan. About 4 years later now I have 100k equity in the property and 140k left to pay. I pay an addition 150 a month on it so my payment is about 1050 a month. If I refinanced to a 15 year, my payment would not go up a whole lot and I would be saying a huge amount of money in interest and several more hundred dollars a months towards principal. My lender says it doesn't make sense and to just keep paying more on principal if I wanna pay it down. Well of course he does because he is still making more on the interest? Does this make sense ? Do lenders not want to refinance to a 15 so they can keep there higher interest payments ? And at what point do you just go to a different lender? If I went straight to a 15 I would be saving 50k plus in interest Thanks
0Reply
15 views

Most Popular Reply

Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y

The opposite of what you expect is true. That loan officer will make more money if you refinance. Hes trying to save you 5 to 10k by throwing away money on closing costs on a refinance you dont need, and giving you that advice even though he will make money on a refinance.

The interest you are paying isnt going to the bank or loan officer....it is going to a fannie mae bond and thus to investors 

[email protected]301-893-4635Podcast Guest on Show #192
District Invest Group545 Reviews
WebsiteView Page
1Reply
See this reply in the discussion

7 Replies

Jump to latestLatest
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    You have something wrong. If you simply pay the extra amount that would be equal to a 15 year payment, it works out Exactly the same. Monthly interest charges are based on the outstanding balance that Day
    0Reply
  • Ryan MahoneyPro Member
    Rental Property Investor · Hastings, NE · Member since 2018 · 57 posts · 53 votes
    8y
    Paul, Wayne is correct. You are paying it down as if it is a 15 year mortgage. Unless you would be getting a large enough drop in the interest rate to offset the cost to refi it makes more sense to just keep doing what you are doing now. You be looking to eat the equity out to invest in another deal. If that is the case a home equity line of credit may be a easier and cheaper option that will allow you access to those funds and greater flexibility.
    0Reply
  • Eric M.
    Investor · Weston, WI · Member since 2016 · 105 posts · 114 votes
    8y

    How much lower rate do you think you can get on a 15 year loan? Going rates near me are 4.1%. After factoring in closing costs it is unlikely to be to your Beirut to refinance. Just keep paying extra Principal and you will be fine.

    0Reply
  • Harjeet BhattiPro Member
    Lender · Glenview IL- CDLP NMLS#230554 · Member since 2015 · 2k+ posts · 747 votes
    8y

    @Paul W. Your lender is good advisor regarding interest rate saving unless you wanted to cash out your equity.  If your lender has time ask him to prepare amortization table for you with 26 year  and 15 year fix, you will understand by paying extra will save your money. 

    0Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    8y
    Do you have the amortization schedule for your loan? plug in your payments and you will see how your interest decreases from early payment. I like the ones with amortizarion graph. It will show your loan term has already been shortened by prepayment. If you add a chuck of extra money on the front of the loan it can have a big impact. Interest has to be much lower to justify a refinance.
    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    The opposite of what you expect is true. That loan officer will make more money if you refinance. Hes trying to save you 5 to 10k by throwing away money on closing costs on a refinance you dont need, and giving you that advice even though he will make money on a refinance.

    The interest you are paying isnt going to the bank or loan officer....it is going to a fannie mae bond and thus to investors 

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    8y

    It's never to your benefit to go through all the pain and costs of a refi just to shorten the term. You can do that by making extra principal payments.  

    If you were getting cash out or reducing your rate by more than .5% or getting out of an Arm or balloon, those would be other reasons to consider a refi. Not just to shorten the length.

    Your lender is a beautiful unicorn, looking out for you and saving you money and pain, Paul. Be happy and keep that lender!

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free