loan problems
I closed on my house last year with a 5.0% 30 Fixed loan. My Unpaid Principle is 200k as of Feb2010. Now the rates are even lower than last year’s. I am very tempted to refinance my mortgage with a 4.25% 15 years fixed. My calculation shows the monthly payment will increase about $400-500 because of the shorter term, which is not a big burden for me…Shall I refinance my mortgage? The refinance would be a ‘No Cost Loan’, which means I will pay nothing. Appraisal and title fees will be covered by the broker. However the interest rate would around 4.3%, instead of 4.2%.
Answer to “Shall I refinance my mortgage?”
In your current situation you’d pay about $186,000 in interest over the life of the loan.
If you refi to 15yrs your monthly payment goes up by about $500 abd you save about $100k over the life of the loan. You also pay closing costs of, let’s say 3% of the loan amount = $6000
You have another option of making no changes to the loan but instead simply sending the bank an extra $500 per month as a principle payment.
The #s of that scenario work out as follows:
- You make a mortgage payment of about $500 more each month – same as above.
- Loan term is cut by 15 yrs – same as above.
- You save about $100k over the life of the loan in interest – same as above.
- No closing costs – you save about $6000 compared to the above scenario.
- You’re not tied into a $1500/month mortgage payment – better than above.
I think the #s speak for themselves.
This is also a great excercise in what a person a can accomplish on their own w/o having to pay any one else to do something.
