As far as I know, if you are doing a fixed rate mortgage (such as Federal Home Loan Bank or Veterans Administration) you can only apply one payment per month. The payment schedule is amortized, consequently you pay a full 30 days of interest each month on the ending balance from the preceding month. You can however, make ADDITIONAL principal payments on your loan in most cases and shave a ton off your long term costs. Fixed rate mortgages through FHLB can change their rates 8x a day. So get your paperwork done through a lender that handles secondary market loans - you will probably need appraisal, title work, etc. With rates down somewhat again, appraisers are busy!!! There may be a delay in this so don't expect a home loan in a one week period if you want a 15 - 30 year locked rate!! You want to have your stuff ready so when the rate you want is there they can lock you. We refinanced ours at 4.875 near the bottom of the rates but I know that they were about the same a couple of weeks ago again. (15 year term - the longer the term, the higher the rate). I think they told me a 15 year was in the 5.25 ballpark today. Call around to lenders in your area to find out who does the long-term fixed rates and their costs.
I would not choose my Home Equity as my primary source for my home funding as their rates are normally variable. When rates start to go up, so does your payment on those. Around here, most can change their rates as often as monthly. I also would not go with a shorter term loan, even with a low rate for the same reason.
Our closing costs were written into our loan also, so we didn't have to pay anything out of hand. Yes, that added into our loan, but the rate decrease more than offset it.
Example: If you have a 7% loan @ $150,000 and you have 23 years left on it, you will pay $1094.88/mo for a total of $302,186 (Interest of $152,186).
Rewrite that loan into a 5.25% loan @ $153,000 (including closing costs) you will pay $1229.93 for 15 years for a total of $221,387.40 (Interest of $68,387.40 + 3000 cc = you save over $80,000 by doing that $3000 investment & rewriting your loan!)
Rewrite that loan into a 5.75 (guessing) loan @ $153,000 (incl clcosts) you will pay $1074.19/mo for a total of $257,806 (Interest of $104805 + $3000 cc = you save $44,380 over your current first example).
These are all calculations you can do yourself if you have an estimated closing cost amount, a balance on your loan, your current interest rate and a ballpark rate of what you would get now. Check your banks website to see if they have financial calculators available on their loan pages. A lot of them do. If not, do a search on the web and you should find the same info.
We also wrapped in some credit card debt too - yes we are dumping that on our house but the rate difference more than made it worthwhile for us!
It's all out there - just be smart & shop around!!!! (PS - if you are in my west central WI area, come to my bank - our gals are great!!!) I would definitely call a local lender first. They are your hometown people! They may not all provide those longterm loans, but someone will!
. He recommended a second broker, who was absolutely wonderful, gave us a good deal, and arranged the closing quickly. It all worked out for the best, since mortgage rates dropped a full 1.5% between our first and second attempts at refinancing.
