Posted on 03/20/2008 3:20:18 PM PDT by Scarpetta
I need some advice. I have a 20 fixed rate mortgage at 5.625%.
The balance on the loan is $109,000.
Does it make sense to refinance at 4.75% with a 10 year fixed?
The closing costs would be $3000.
Also, I currently add $500 to the principle payment every month, so I will have my existing loan paid off in 8 years.
We just refi’d, too. I guess it depends on each situation individually..
No. Take the 10 year payment and apply it to the current mortgage.
More info needed:
How many more payments do you have on the existing without extra amount for principal reduction?
Current payment on loan?
Payment of refi?
Is the $3,000 costs upfront or will be added to loan balance?
Take the 3K and pay it to your P!
I did a little math here, if everything were equal, if you were getting a loan on the same terms, meaning, 20 years, your savings a month would be roughly $50 a month, which means it would take you roughly 5 years to recoup the $3,000 in closing costs. I happen to have an amortization table on the back of my realtors business card.
I take it you plan on staying in the house, otherwise, it would be hardly be worth the effort to refinance given how long it would take you to recoup the closing costs.
Talk is the Fed may be nearing the end of its rate cutting, but there may still be another 1/4 point cut to go.
I have a little less than 15 years left on my current mortgage.
My payment is $917. The new payment would be $1194.
The $3000 would be added to the loan balance.
If you won the lottery and all of a sudden had a Brazillion dollars and wanted to pay off your mortage, do you get some kind of discount for paying it off early or is there some kind of penalty for an early pay off?
And would you have to pay off all the expected interest that the bank would make over the life of the loan?
Thanks.
I have no prepayment penalty. The more principle paid, the less interest paid over the life of the loan..
That’s my main question. Will I have significant interest savings if I refi? Or will I just tie up more of my cash in a higher monthly payment, and regret the decision if something bad happens.
Awesome tool! Thanks.
It showed me that I’m better off sticking with my current loan and payment plan.
Back of the envelope of total interest paid:
Current Loan with no extra payments: 50,731
Current Loan with Extra $500 every month: 26,500
New Loan with no extra: 28,270
New Loan With Extra $233 every month: 22,589 (The new loan
is an extra 277 per month so 500 - 277 = 233)
That’s very helpful. Thank you.
Your welcome.
One little-known factoid that may or may not be a factor, but seems awfully pertinent in this day and age - a first, primary mortgage is treated quite differently in the event of default on the part of the borrower. In short, if the borrower has ever re-fied, in the event of foreclosure the lender can go after virtually all other assets to collect, unlike a first mortgage. Again this may not affect your particular situation but it seems to be little known, though remarkable.
You never know. Thanks for the warning.
Make the deal, take the lower rate...keep paying 1400 a month.
“I have a little less than 15 years left on my current mortgage.
My payment is $917. The new payment would be $1194.
The $3000 would be added to the loan balance.”
I guess I’m a little confused at the advice given here.
You’re paying 11K a year for the next 15 years=165K...
The new loan costs 14K a year for 10 years= 143K...
Am I missing something?
Seems like a no brainer.
Keep paying the extra and you’ll be paid off in no time.
Well, the numbers make sense but I think the citizen-consumer deserves to make informed choices, esp. when it applies to probably the most important economic decision in most peoples lives. Anyhoo, with that outta the way among other things, the next question is. - with whom are you refinancing the mortgage? Can you get a better deal with someone close to home, a smalltown bank, e.g. someone you can actually go in and sit down and talk to. This will likely prove very important. Right now, with so many loans sliced, diced, cubed and squared, and sold worldwide, there is some question
as to who really owns the loans/underlying security. Hm.
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