Refi question from newbie

[MJK]

Hello all! This is my first post although I have been reading a lot on this message board for awhile.

Here's our situation. We have about 25 yrs left on a 5.75% mortgage and the balance is 197,000.00. Should we refinance at 5.0% for 30 yrs? Closing costs would be around $1100.00. According to my math it would pay off in about a year and a half.

Any advice would be appreciated.

thanks

[noppenbd]

Check out these calculators. I think 3a would work for your situation:

Mortgage Calculators

[jIM_Ohio]

What is current payment and what would new payment be?

[MJK]

Originally Posted by noppenbd

Check out these calculators. I think 3a would work for your situation:

]

Thanks! I've been looking for a calculator like that.

[MJK]

Originally Posted by jIM_Ohio

What is current payment and what would new payment be?

Our original payment was 1237.00 with an original balance of 212,000.00. The new payment would be 1057.54 on the new balance of 197,000.00.

I forgot to mention our ages if that matters. My wife & I are in our 30's.

[jIM_Ohio]

Keep in mind the payment is lower because you were 5 years into your current repayment plan.

You took out a 30 year mortgage in 2004. It would be paid off in 2034.
You refinance in 2009 and it will now be paid off in 2039.

Do you know how to use an ammortization schedule?
I use excel sheets from http://office.microsoft.com/en-us/te...dule&av=TPL000

I would plug in new mortgage info, then add in "extra principle" until you have a 2034 payoff.

This is your real "new payment", then calculate the break even point from here.

The current difference is $180. I am expecting that your real difference is about $100 (if you pay $80/mo extra I estimate your payoff to be in 2034).

How did you calculate your original break even point of 18 months?

I am not advising to NOT refinance. I am advising to make sure you understand payment went down $80 because of 5 years of payments and $100 because of lower interest rate (total savings of $180/mo). That savings is costing you 5 years of extra house payments @ $1100/mo.

The smart thing to so would be to send some of the $180/mo savings to the new payment so you keep the same repayment schedule on the property.

[MJK]

Sorry, I just realized I started this thread in the wrong category. I meant to put it in Personal Finance.

[MJK]

Originally Posted by jIM_Ohio

Keep in mind the payment is lower because you were 5 years into your current repayment plan.

You took out a 30 year mortgage in 2004. It would be paid off in 2034.
You refinance in 2009 and it will now be paid off in 2039.

Do you know how to use an ammortization schedule?
I use excel sheets from

I would plug in new mortgage info, then add in "extra principle" until you have a 2034 payoff.

This is your real "new payment", then calculate the break even point from here.

The current difference is $180. I am expecting that your real difference is about $100 (if you pay $80/mo extra I estimate your payoff to be in 2034).

How did you calculate your original break even point of 18 months?

I am not advising to NOT refinance. I am advising to make sure you understand payment went down $80 because of 5 years of payments and $100 because of lower interest rate (total savings of $180/mo). That savings is costing you 5 years of extra house payments @ $1100/mo.

The smart thing to so would be to send some of the $180/mo savings to the new payment so you keep the same repayment schedule on the property.

Great info. Yes, I do realize my loan balance is lower and that $180.00 is not really what I'm saving per month. I can't remember which online calculator is used to figure out the savings. I will play around with the schedule you provided. Thanks for the help.

[jIM_Ohio]

Originally Posted by MJK

Great info. Yes, I do realize my loan balance is lower and that $180.00 is not really what I'm saving per month. I can't remember which online calculator is used to figure out the savings. I will play around with the schedule you provided. Thanks for the help.

One great example to look at is pay $80/mo for 25 years or $180/mo for 10 years to get same deal.

$24000 paid vs $21600 paid ($2400 difference).

[MJK]

Originally Posted by jIM_Ohio

That savings is costing you 5 years of extra house payments @ $1100/mo.

The smart thing to so would be to send some of the $180/mo savings to the new payment so you keep the same repayment schedule on the property.

You are making me rethink this a little more. I think I was thinking short term & not enough long term. I see my overall savings over 30 yrs is not that significant. Although it is saving some money. Thanks again for your help.

[jIM_Ohio]

You want to refinance at the lower rate. Hopefully my comments are not dissuading you from a good decision.

My advice would be to pay the $80 extra per month to keep same payment plan.

The $80/mo ($960/year) you pay now saves you 5 years of $1057/mo payments ($12684/year or $63420 total).

I would pay $960/year for 25 years ($24000) to get $63420 5 years later.

There is savings, significant savings, if you look over a 30 year period. You want the lower rate.

I usually look for an 8% drop in payment.

$180/$1237=14.5% drop. This means you can save one full mortgage payment per year.

[MJK]

Originally Posted by jIM_Ohio

You want to refinance at the lower rate. Hopefully my comments are not dissuading you from a good decision.

My advice would be to pay the $80 extra per month to keep same payment plan.

The $80/mo ($960/year) you pay now saves you 5 years of $1057/mo payments ($12684/year or $63420 total).

I would pay $960/year for 25 years ($24000) to get $63420 5 years later.

There is savings, significant savings, if you look over a 30 year period. You want the lower rate.

I usually look for an 8% drop in payment.

$180/$1237=14.5% drop. This means you can save one full mortgage payment per year.

That makes sense. Next question is do I hold out for something better than 5.0%????

[jIM_Ohio]

Originally Posted by MJK

That makes sense. Next question is do I hold out for something better than 5.0%????

I wouldn't get too greedy.

I am at 5.75% right now and once my payment drops 8% I am not looking for 9%.