So, I’m sitting here with this loan hanging over my head, a hefty 112k that I’ve been carrying for the past five years. The lock on it expired, and now it’s reset at a not-so-great rate of 8.5%. This loan is for my business, so I’m limited to commercial loans. Here in Nashville, it seems like all the loan options are linked to Prim, which is currently offering rates at 7.25%.
I’ve been weighing my options, and here’s what I’ve come up with. Option A: I could refinance with another bank at 6.5%, but there’s a catch – I’ll have to factor in about 2.5% in closing costs. Crunching the numbers, it looks like it would take me around 1.25 years to make up for those closing costs through the savings on interest.
Then there’s Option B: My current bank is offering a loan modification for a fee of $750, but at a slightly higher rate of 7.25%. According to my calculations, it would take about 1.4 years to recover that fee through the reduced interest. From a pure return on investment perspective, the full refinance seems like the better choice because it breaks even sooner and then offers greater monthly savings. But man, I really don’t like the idea of shelling out for closing and origination fees and having to start the whole ROI calculation process all over again, you know?
If I go for the full refinance, the closing costs would set me back around $2700, and that’s money out of my pocket today. And then there’s Option C: Hold off for now. Maybe in the spring, the rates might be more favorable, and I could reassess my options then.
Decisions, decisions. It’s a lot to think about, and I’m not a fan of the upfront costs involved in a full refinance. Waiting might be the smart move, but then again, who knows what the rates will look like in the future. I’ve got some pondering to do, that’s for sure.