15 year mortgage? Refi question...

[crispychicky]

I think the rate on the 15 yr was 3.9% DH said this weekend he's going to shop around and see if we could do better. I'm just worried that if we do get a better rate, the fees might be more so I'm going to look out for that.

Some are mentioning job changes/security & such and if one of us has to stay home and not work. So, I'll add that I am a SAHM and DH's job is secure. (yes, anything could happen & we are prepared for that, but we aren't worried about him loosing his job)

Am I reading correctly that some are advising us to go from 23 years left on our mortgage to a 30 year???

I'm not refinancing because I need to lower my payments. I'm looking to do it to pay it off sooner and sve on interest so how would going to a 30 year loan do this?

Just because you have 30yrs to pay off your mortgage, doesn't mean you can't pay it off in 20yrs, or 15yrs, or even less. Any additional amount you pay early can be applied to your principle and therefore reduces the total interest you pay. Getting a longer term loan lowers the minimum monthly payment you can pay without defaulting.

For a $200,000 loan at the rates you stated, a monthly payment for a 30yr loan would be roughly ~$1000. The monthly payment for a 15yr loan would be ~$1500. Now, if you took out a 30yr loan but paid $1500 a month, you'd have the whole mortgage paid off in ~15yrs and would have paid about the same amount total as if you had taken out a 15yr loan.

After the crash in 2008, I have read some financial experts are recommending going this route in case of job loss, disability, etc to keep the monthly payments as low as possible for a rainy day.

 

[Desnik]

Just because you have 30yrs to pay off your mortgage, doesn't mean you can't pay it off in 20yrs, or 15yrs, or even less. Any additional amount you pay early can be applied to your principle and therefore reduces the total interest you pay. Getting a longer term loan lowers the minimum monthly payment you can pay without defaulting.

For a $200,000 loan at the rates you stated, a monthly payment for a 30yr loan would be roughly ~$1000. The monthly payment for a 15yr loan would be ~$1500. Now, if you took out a 30yr loan but paid $1500 a month, you'd have the whole mortgage paid off in ~15yrs and would have paid about the same amount total as if you had taken out a 15yr loan.

After the crash in 2008, I have read some financial experts are recommending going this route in case of job loss, disability, etc to keep the monthly payments as low as possible for a rainy day.

Ok, I get it now!

 

[wdwmom0f3]

This exactly. I'd stick with a 30yr mortgage (probably option #1) and pay it as if it were a 15yr. This would give you lots of flexibility while still paying off your house in 15yrs.

It'd be nice to have the option of paying less on you mortgage if some unforeseen circumstances came up, like job loss, disability, you have kids and one of you wants to be a SAHM/D, one of you needs to take time off from work to care for an aging parent, etc. If any of these things happen, you could go back to paying the lower, base monthly payment of the 30yr mortgage. When things turn around, go back to paying it off as is it were a 15yr mortgage. This would give you a few hundred(~$500?) buffer in your monthly budget.

Most people, not all, would not stick to it. I am putting myself in that too.

We did a refi last year on our home going from a 30 year (6.5 I think) with 23 years left on it, to a 15 year fixed at 3.875. We had some closing fees but we rolled it in to loan. I wish there were no closing cost, but we have already recovered those fees. Our payments went up by $50.00 a month. Where we were seeing less than $200.00 go towards our principle balance each month, we are now seeing around $600.00 going to principle which is a big difference.
I think this is one of the best moves we have made in a while.

 

[iheartpeterpan]

Let me give you a for instance here. I'm going to assume you had a $200,000 mortgage at the very beginning, and you financed over 30 years with a 5.3% interest rate. Since you are saying you have 23 years left, I'm assuming you have made 84 payments (7 years worth) and are on payment # 85. This would put your hypothetical balance at $176,617.42, assuming you made all your payments on time.

If you continue your 30 year mortgage at 5.3%, then you will pay off your final mortgage with payment #360, and your total interest paid over the years would be $128,800.14.

If you continue your 30 year mortgage at 5.3%, and add $200 per payment beginning with payment #85, you would pay off your mortgage in April of 2029, after 208 additional months - or 17.3 years. Your last payment would be around $850. Your total remaining interest payments would be $92,373.80.

If you refinance today at a 15 year mortgage with 3.9% and put the $2700 in the note, your payments would indeed by about $200 more, and your total interest payments would be $57,711.82.

In this example, it would be in your best interest by a lot to go with the 15 year refinance. ($57,711.82 + $2700 = $60,411.82. So you would save almost $32,000 over the life of the loan in interest savings by refinancing at 3.9% for 15 years vs. paying $200 extra, and almost $69,000 over the life of the loan vs. doing nothing.

If your mortgage is bigger, these numbers improve. If your mortgage is smaller, then the impact is less.

Hope this helps.

 

[scrapquitler]

I need some advice because I'm not sure what is the better option for us.

We have 23 years left on our mortgage which is a 30 yr fixed loan at 5.3%.

We were thinking of taking advantage of the lower rates and inquired about it through our current loan holder just to see what they offered.

We have a couple of options and I'm not sure what we should do.

1) Refinance and start over with a 30 yr loan but the rate would be around 4.3% and would save us a couple hundred dollars a month.(This isn't something we would do, it would be crazy right?)

2) Go down to a 20 year loan and save $8 per month. (the rate is the same as above)

3) Go down to a 15 year and pay around $200 MORE than we are currently paying per month. (the rate drops to under 4% not sure exactly what, DH knows the particulars and he's not here right now)

All three options have the same fees, around $2700 closing cost and small amount out of pocket for app fee, etc..

We can afford the increase per month so #3 is looking like the best option, no? Isn't paying off the mortgage sooner the best option or am I missing something?

Thanks for any help you can offer!

OR you can take option #1, and instead of 'saving' that $200 per month, keep making the same payment you are making now. You'll pay less interest overwall AND you'll pay off your loan faster (probably even faster than the 23 years you currently have remaining, because all that extra $200 per month will come straight off the principal). This option also gives you a little leeway in case of a financial crunch on your end...you'd have the option to NOT send the extra $200 if something came up and you needed a bit of extra cash that month.

 

[andrews_dad]

OR you can take option #1, and instead of 'saving' that $200 per month, keep making the same payment you are making now. You'll pay less interest overwall AND you'll pay off your loan faster (probably even faster than the 23 years you currently have remaining, because all that extra $200 per month will come straight off the principal). This option also gives you a little leeway in case of a financial crunch on your end...you'd have the option to NOT send the extra $200 if something came up and you needed a bit of extra cash that month.

I got a 3.500% for 20 years with no points offer from a local broker. Every place I called with 3.85-3.65%. You should be able to do better than what you have.

 

[Desnik]

Let me give you a for instance here. I'm going to assume you had a $200,000 mortgage at the very beginning, and you financed over 30 years with a 5.3% interest rate. Since you are saying you have 23 years left, I'm assuming you have made 84 payments (7 years worth) and are on payment # 85. This would put your hypothetical balance at $176,617.42, assuming you made all your payments on time.

If you continue your 30 year mortgage at 5.3%, then you will pay off your final mortgage with payment #360, and your total interest paid over the years would be $128,800.14.

If you continue your 30 year mortgage at 5.3%, and add $200 per payment beginning with payment #85, you would pay off your mortgage in April of 2029, after 208 additional months - or 17.3 years. Your last payment would be around $850. Your total remaining interest payments would be $92,373.80.

If you refinance today at a 15 year mortgage with 3.9% and put the $2700 in the note, your payments would indeed by about $200 more, and your total interest payments would be $57,711.82.

In this example, it would be in your best interest by a lot to go with the 15 year refinance. ($57,711.82 + $2700 = $60,411.82. So you would save almost $32,000 over the life of the loan in interest savings by refinancing at 3.9% for 15 years vs. paying $200 extra, and almost $69,000 over the life of the loan vs. doing nothing.

If your mortgage is bigger, these numbers improve. If your mortgage is smaller, then the impact is less.

Hope this helps.

Thank you! This helps me so much!!!

 

[lisaross]

why not leave what u have and just prepay each month?

I need some advice because I'm not sure what is the better option for us.

We have 23 years left on our mortgage which is a 30 yr fixed loan at 5.3%.

We were thinking of taking advantage of the lower rates and inquired about it through our current loan holder just to see what they offered.

We have a couple of options and I'm not sure what we should do.

1) Refinance and start over with a 30 yr loan but the rate would be around 4.3% and would save us a couple hundred dollars a month.(This isn't something we would do, it would be crazy right?)

2) Go down to a 20 year loan and save $8 per month. (the rate is the same as above)

3) Go down to a 15 year and pay around $200 MORE than we are currently paying per month. (the rate drops to under 4% not sure exactly what, DH knows the particulars and he's not here right now)

All three options have the same fees, around $2700 closing cost and small amount out of pocket for app fee, etc..

We can afford the increase per month so #3 is looking like the best option, no? Isn't paying off the mortgage sooner the best option or am I missing something?

Thanks for any help you can offer!

 

[snake114]

If you go with the 15 year, I would suggest shopping around a bit. I am closing next week on a 15-year refinance at 3%. I had 26 years left on a 30 year at 5.25%- my payment is only going up by about $150, and the loan will be paid off 11 years faster!

 

[karinbelle]

Have you checked with your local credit unions? Most of them are not restrictive on membership, and we are refinancing with under $500 closing costs for a similar loan situation.

 

[DisneyAndRedSox]

Before you do anything, go on Zillow and look at similar houses that closed in your town recently. We started to re-fi and paid for an appraisal last month, we were shocked how low our house came in at. Turns out there were so many short sales that closed 4th quarter of 2011, and that is what they used to compare our house to. If we went through with the re-fi we would have had PMI or had to put in more money down on the house (already did that last time we refinanced...)

 

[LauraR]

This exactly. I'd stick with a 30yr mortgage (probably option #1) and pay it as if it were a 15yr. This would give you lots of flexibility while still paying off your house in 15yrs.

It'd be nice to have the option of paying less on you mortgage if some unforeseen circumstances came up, like job loss, disability, you have kids and one of you wants to be a SAHM/D, one of you needs to take time off from work to care for an aging parent, etc. If any of these things happen, you could go back to paying the lower, base monthly payment of the 30yr mortgage. When things turn around, go back to paying it off as is it were a 15yr mortgage. This would give you a few hundred(~$500?) buffer in your monthly budget.

The problem is you're still paying more in interest, because the rate on a 30 year mortgage is 4.3% and the rate on a 15 year is only 3 to 3.5%. So even if you prepay you will end up paying more interest over the life of the loan. Also if you are already down to 23 years it doesn't make sense to restart the clock at 30 years.