I was a mortgage banker for 15 years. You can actually convert a 30-year mortgage into a 17 year mortgage by sending only 1 Extra payment per year in January. So instead of 12 payments per year that you normal would pay, you make a total of 13 payments during each given calendar year. That 13th payment needs to go to principal only and make sure you write that on the memo of your check otherwise the bank will assume it's their interest versus 100% Principal. You won't feel the added stress of making that high 15-year mortgage payment. Plus you will have the benefits of a 30-year loan payment with this accelerated interest reduction. This will drastically save you hundreds of thousands.

Im refinancing from a 4.375% to a 0% when I pay the mortgage off this year.

I refinanced back in june from a 6.125% to a 2.99 with rocket mortgage, saving over 250 /mo. I'm still throwing that 250 and than some to the principal

Just refinanced. Was 18 months into a 0 down 30 year 5.75% int, now i'm on a 15 year 2.25% int. With appreciation, my home value is now more than 80% of the loan so I avoided PMI too. Luckiest thing that's ever happened to me. My monthly payment went up $200.

Thanks, Dave & Chris! No one has been able to explain the break-even point as clearly as you did. This will help me and my clients greatly.

Looks like my math teacher was right, math is useful, and fun... fun cause saving money is fun

I'm in the middle of a refinance right now and going from a 4.375% to 2.0%. Woo!

I like where Dave says your not going to refinance a 30 year loan at 3% to a shorter term loan, say 15 years. Just add the difference in loan payment to the 30 year loan. This is also helpful in these times of uncertainty. If something happens, job loss, or salary decrease, you can then go back to making payments based on the 30 year rate. If you refinance for a 15 year loan, if something happens, you are stuck with a higher payment that you can’t get out of, then possibly foreclosure. The only way to make a15 year payoff any better is if the interest difference is 5 or 6% between the two loan terms.

I just got one in which they paid me to refinance from 4.75 to 3.375 ..in other words the lender credit was more than the closing costs and my payment dropped 200/mo

Just refinanced our home went from a 30 year 4.75% rate with $87 per month going to PMI to a 15 year 3% rate no PMI we are ACTUALLY SAVING MONEY!

Oh my when he said he was going to keep it for 18 months...the reactions!

1% rate reduction on $200k saves less than $2k each year. The principal is lowered each month so over a year, it's less. The second year saves less and so on.

I hardly understood any of that. Do you have a resource that goes into the same issues in greater detail and with more explanation? Thanks.

People also factor in their prepaids into the closing cost breakeven calculation. Probably costs less than the 5k he mentioned.

I would add one more thing to this. If you itemize your deductions for taxes, your savings are only 75% of interest difference (assuming 25% marginal tax rate). One more consideration, if you are getting rid of PMI as result of refi, that adds to your savings. More complications - you often have a choice on how you structure your refi - lower closing costs and higher rate or higher closing cost and lower rate; unless you plan to move soon, most people would be better off selecting higher closing cost but lower rate.

Chris with the side answer...too funny

I just went from a 30 year 4.5% down to a 15 year 2.375% ..my mortgage total went up about 8k after everything was said and done. Those guys don’t work for free. But hey, I’ll be saving over 100k in the long run

So much helpful. Thanks both and bless you.

If you can drop 1 whole point, it’s worth it. If you can drop 2, it’s even better. I have excellent credit - 843 Fico. I have 2 houses and want to refi the second. When I bought the place in 2018, the prime rate was 4.7. My mortgage on it is $2020. I don’t know how long I’ll keep the place or if I’ll move and that’s the main reason I don’t wanna refinance immediately. Furthermore, the economy continues to worsen and the rates continue to drop. But thus far, all I’ve been offered is 3.5%. And they want $8000 up front. My break even is 5 years.

Back in the days I was a single mom of three young kids and trying to make ends meet. I had the home in L.A. area and my mortgage was $2,600 monthly. It was so hard I was just working to pay the bills and barely had any money for groceries , gas money , insurance, car loan. It was tough so I had no choice but to refinance my house three times within 10 yrs I spent there. I would take out all the equity and remodeled my house So once I sold it in 2007 for $665 ,000 I owed everything I just got about $8 ,000 of equity. I bought it for $229,000 back in 1997 and sold it in 2007 for $665 ,000. I've learned my lesson

Refinancing from a 3.75% to a 2.85% 20 yr mortgage. I didn't want to push my luck to a 15 yr Mortgage.

Looking at these comments from 2024 is depressing

Dave, why do you have guest hosts, if you dont let them speak?

I only do 0 cost refinances. That makes it easy to calculate, if rate drops then refi, with nothing to lose.

Watching this video talking about 3% rate in 2024. 😢 Rates are killing today!

I just refinanced my home at 2.5% @ 15 years. Old loan: 30 year with 27 years left on a 3.75% rate.

He really is just wafflin'

Seeking advice.. I’m a first time home buyer with a 130k, 30 year mortgage @ 7.25 interest rate. I put a 3% down payment. And I pay 1,120 a month. I would like to keep the home but don’t know if I should sell it or when to refinance. I make at least 3k biweekly and 0 debt . Thank you and I appreciate the time and advice . Really considering calling the show lol..

I used a State Grant to purchase my home, which came with a higher interest. I had a 30yr Fixed @ 5.625% and went to a 15yr Fixed @ 2.5% , no longer paying PMI, and my monthly payment went up by only $80🤯 that is a 3.125% SAVINGS

I’m in the process of refinancing to cut off 7 years off the life of my loan. Payment went up $100. I think that’s worth

I like how chris is faking his math on his notepad and pretending like he’s following.

As a former loan officer in the mortgage industry, surprisingly there are a lot of dummies that wonder why the payment increases when refinancing into a 15 year at a lower rate. The reality is though most people can’t afford a 15 year when completing a purchase transaction.

If you are waffling or undecided...why are you buying...

That’s only true if your paying it on schedule, if you pay off early then you shouldn’t worry about Interest rate

Dave hit it on the head and keep the 30 if you got a decent interest rate and make an extra payment on the principal . This is what my daughter is doing . This way you pay it off early . Maybe 15 years or sooner depending how much extra you can put towards paying down the principal . It also gives you a safety net if you have employment or cash flow problems you still have a smaller payment to make over a 15 year mortgage if need be . A mortgage is immune to inflation . The payment is the payment . I payed off my mortgage back in 2004 . I had a 30 year at 8.25% . It took me 4 years of payments before I went to the bank and paid it off . I think I still paid about 10 grand in interest on a $45,000 mortgage . Now you need to be a discipline type of person that can pay down a mortgage at an accelerated rate if not it would make sense to begin with a 15 year mortgage .

Oooh it’s Chris!!! Miss ya buddy. Hope you are well and keeping your head up 👊

$5000 closing cost? That's too much !

Great call and advice!! Thanks

This just helped me with my car refinance, once I get out of negative equity

Whose lending at 2.2% ?? I want those rates

Good information! Thanks so much!

What about a 20 yr at 2.75....from a 30yr at 4.75 ....Im in the middle of refinancing my loan.

I just did the math. If I refinance I'll save money (barely when considering interest paid and closing costs). We plan on keeping the home

Mortgage banker here too... quite a bit of misinformation here. Firstly, I agree that you probably shouldn't refinance unless rate improves by at least 0.5%. Secondly, mortgages don't typically stay on the books longer than 6 years (7 tops, typically). But, you shouldn't just compare the rate and difference in payments. You should pay attention to the fees. If a refinance costs you $10,000 up front, then refinancing may not be worth it... even if your payments go down by a fair bit. There are a lot of shady lenders that advertise great rates, but charge ridiculous fees to do the refinance. And that may be because they are attempting to price themselves out of a market due to volume.

When the interest rate is lower than your current one, or when you have enough equity to cash-out refinance and buy another property.

Only if the new interest rate saves you more money than the refinancing process costs

Very helpful. I am in the refi process now and the break even point was confusing. This has cleared it up!!

This was very informative.

Only 5.1 years for the average mortgage? Wow that sounds short..

Someone PLEASE clarify. What does Ramsey mean by closing costs? Does he mean Total closing costs? Or do I exclude prepaid costs like homeowners insurance premium and property taxes to arrive at the closing costs (total - prepaids)? If someone knows please let me know. I'm not clear.

Good explanation of interest savings, vs cash flow savings. Both are important to understand and understand the difference based on goals and plans/needs.

great informative video

Miss you Chris!

I love you show dear Dave Ramsey

We have a 30 year but are paying it off in less than 15. We could not afford the higher payment or felt it would be cutting it too close with a 15 year. If we have extra we pay it and since paying off all other debt we have freed up the extra money to throw at the mortgage. It will be paid off by December 2021 at the latest.

Not true I had a fha loan so when I refinanced I saved that $140 a month plus my lower interest rate

If you're really intune with your money.. go 30 invest what you would pay in a 15 and make more money in the long run...

I agree with them. We're refinancing as well to take advantage of the low rates going from Old Loan: 30 year fix, 4.375%, 23 years left New Loan: 30 year fix, 2.875% Closing cost ~$7k so will pay itself in less than 2 years. No more PMI so an additional saving of $70. The new loan will reset the clock but I feel it'll be worth it. We're going to pay at the same rate as if we had a 15 year and plan to make additional payments when we can work the hopes to have it paid off by the time I'm 50 (I'm 40 now)

How can I call in and ask a question?

What if I want to refi my 2.75 fha with PMI to go conventional to get rid of PMI and new rate would be 3.375?

Just fixed for 5 years at 1.49% (in the UK) mortgage money is stupid cheap at the moment!

Don't pay refi fees. Take that expense and pay extra towards principle .

You zipped past the 1700 on top...what was that figure?

I'm 5 years into a 30 year mortgage at 3.8% and I'm on the fence about a refi

Just pay the 15% lump sum every year and bank the savings in interest. I went from 4.59% plus $678 a year in admin fees and $300 renewal fee to 1.95%. My closing costs were $2000.

This seems incomplete. There is no mention of the monthly cash savings from a higher interest to a lower interest loan that would, if the home were NOT refinanced, be an opportunity cost. Those savings could be put into any interest bearing account. It's always good to pay down debt, but it's not AS good if the money could grow faster than the interest expense of the loan. Am I wrong?

So what is APR then? About to buy a house with a 2.99 interest rate but an APR is around the 3.5. Should I be doing the math with just apr ? First time buyer

This was terrible advice... 1) you absolutely go off of your new payment for the “break even” calculation. New payment savings divided by closing costs. 2) If you’re selling in 18 months the PMI savings may not be worth it to bring 10k to the table. 3) You’re selling in 18 months, don’t refinance.

Gotta run the numbers to make good financial decision.

Or should I keep my balance and make double additional payments ?

I'm trying to refinance to get a lower interest rate and they are saying i have to put a down payment to refinance? Is that normal?

Thank you!

A person doesn't just know the value of the APR. Always ask what are the closing cost and expenses property taxes and insurance in dollars and cents. It helps also to request a breakdown of including in the loan and/or excluding. Just so you can see the payment difference it may or may not be important 😉

When your monthly payment can be lowered by $100 or more. Anything less than that isn’t worth it. Believe me, I’ve looked into it.

Hi so funny thing I'm at a 3% 30 years .been in my home for about a year I would like to remove my PMI. I put 10% down in my house value went up I have a 20% Equity so what do you advise

A 30 yr is much better with these low rates , leverage your money !

He said the average loan duration 7/2 years as anybody ever pay off their home,? Better just to buy a rv if you move luke that!

Hi there I just love what you said if you have 3% to not refinance I've been in my home for 6 months now I want to kick off my PMI I am at 3% at the moment but I'm more concerned about saving on PMI can you help plz?

So much misinformation in this video. As a mortgage banker, APR goes down when you pay more in points. More points=higher costs. Your costs could be higher when the APR is lower. The interest rate is what you want to pay attention to because that what's used to calculate the interest.. The APR is a summary of all the fees (aside from points=prepaid interest) expressed as rate. Look on box A pg 2 of the LE to see the lenders fees. Compare that to to the interest rate to get a true cost comparison. *gets off soap box

Dave, your comment at the end stood out to me. You preach a 15 year fixed mortgage. What are your thoughts on taking out a 30 yr but making payments to pay it off in 15? That way, should the need arise, you have the flexibility to make smaller payments without becoming delinquent. Granted, a person should have emergency savings before buying a home. You would also be paying a slight premium since the rate is higher, and the temptation exists to buy more home and/or not stick to the 15 year plan...just a thought though.

wish I could have a sit down with you two guys.

I am currently refinancing my house and i am putting money down so I can get rid of the PMI payment also. My actual interest rate is %4.8 and the new interest will be %3.2. my pay off is $270 000 and my new loan is $245 000 @ %3.2 and no PMI. my concern is that I am putting $30 000 down plus $7000 of closing. that is $37000. that can go to my principal in my current loan lowering my debt to $230 000. Should I invest my money in the principal payment and then refinance a lower amount? seems to me that putting $37000 to my principal will be the better option. but I will keep the PMI and the %4.8 interest as well.

I wonder if he took into consideration the cost of doing the refinance. Banks don't process this paperwork for nothing you know. There's always a charge.

Take a higher rate with no cost on such a short term of planning on owning the home

No Pre paids?

When you have 100k Equity and lower interest rate then refi

But so many people don’t notice that they added years to their payments.

I miss Chris

Everyone can’t afford a 15 year.

I did a 30 yr mortgage at a fixed rate of 6.4% and wonder if it's worth it to refinance, taking advantange of these really low rates since I've paid 15 yr of the mortgage. Closing cost is something I don't agree with but these rates are tempting to strongly consider a refi. Current principal balance is $79,000. Any advise.

Here’s the skinny: If you’re thinking of refinancing ask yourself these three questions. 1. How long will you be in your house? Anything less than 2 years you’re probably not recouping your closing cost. Even then, the average American doesn’t stay in a mortgage for more than 7-8 years. Base your decision on how much interest you’ll save over the next 7-10 years. Everything after is just icing on the cake, that is if you haven’t refinanced or moved. 2. What’s your remaining balance? Interest rates affect larger loans more than smaller. Going from 4% to 2.5% on a $75,000 mortgage is a lot different than on a $150,000 one. Based on your situation you might not want to take on the $2,000-$4,000 in fees if your ROI isn’t great on a smaller loan. 3. What’s my goals? Are you trying to save money? Are you trying to save interest? Can you do both? Do you have equity you can use to pay off other higher debt? What would a skipped months payment do for you? Every situation is different. There’s no one size that fits all. Just make sure your financial goals line up with your emotional ones. If saving $50 a month to put towards other debt and skipping a months payment helps you get by, that could be your goal. If saving $30,000 of interest by moving into a 15 year is what you’re looking for, that could be your goal. So when does a refinance make sense? In short, it depends on YOUR goals.

I gotta a question. Please answer anyone, I'm a new homeowner. I've been in my house two years. My interest rate is 5.25% my mortgage is 1300 a month. This is not my forever home. I've been getting a lot of refi offers. Should I refi even though I only plan to keep home maybe 3 more years??

hey dave. I'm a single mom wanting to buy a home within a year or two. My total debt is $10,000. I owe $8,000 on my car and $2,000 are student loans. I don't have any credit cards or anything like that. Do you think I should sell the car that I owe on? I have another car that's in decent shape and paid for. I just think paying on my car loan will help increase my credit while I save up to buy a home.

Is there any way to refinance your home immidetley after closing if you have say 30K+ equity? how would you go about that?

$5K in fees? Way too high!

I wish I could ask Dave a question?

Absolutely totally not true! It’s called a note rate it is not a contract rate first of all secondly this guy said you payment is based on the APR! That is absolutely false!! Your payment is based on the note rate!! The APR is an expression of your total interest paid because some of the closing fees are considered interest! But your note rate is how you get the payment!!! 250k loan at 2.5 note rate the payment is 987.80 30 yr Thats The same if that loan has a 2.8Apr or a 3.5 APR The note rate determines your payment!! The APR tells you what your closing cost was expressed as a rate.

Help! I signed today a bunch of papers, don’t understand nada, my original was 165 K for 40 years @ 6.99%, I paid monthly $1005.40 14 yrs ago, I paid extra now is 145 k. I would like to refinance, I found a company 1.875% for 10yrs , will pay 1400 a month but with all the fees added up, it will go up 155,750. K plus $500 appraisal from my pocket. Someone Help is that a good move?

How is the closing costs paid during a refinance ?

I just close my refinan,I wish u did this show a mounth a go.