Posted by sffleague on July 1, 2005, 2:18 pm
I've been reading so much about mortgage refinancing that I think I'm
confusing myself. We currently have a 30-year mortgage at 6.375% on a
house that we've only been in for a year. The monthly PITI is about
$1100. We've found that we can afford pay an extra $300 of principal
each month, so the total payment is $1400.
Now I'm finding that I can refinance to a "no cost" loan at 5.5% on a
15-year ($1330 PITI) or 5.875% on a 30-year ($1029 PITI).
We're in our early 30's, no children, no debt aside from the house.
But we also really can't say how long we'll be in the home. Almost
definitely not for the life of the loan, probably not more than 5
years.
I know that, at the very least, we should do one of the no-cost
refinancings and get the instant savings. But here's what I'm sure is
the dumb question-- according to the amortization calendar, I currently
pay down about $440 of principal each month (when including the extra
$300 that I pay on top), whereas if I had the 15 year no-cost refinance
loan at 5.5%, I'd be paying down about $240 in principal each month to
start with. It just seems like you'd want to be paying as much
principal as possible, which is what I'd be doing with the 30-year
loan. What am I missing here?
sffleague@yahoo.com
Posted by Andy Hill on July 1, 2005, 3:17 pm
sffleague@yahoo.com wrote:
>I've been reading so much about mortgage refinancing that I think I'm
>confusing myself. We currently have a 30-year mortgage at 6.375% on a
>house that we've only been in for a year. The monthly PITI is about
>$1100. We've found that we can afford pay an extra $300 of principal
>each month, so the total payment is $1400.
>Now I'm finding that I can refinance to a "no cost" loan at 5.5% on a
>15-year ($1330 PITI) or 5.875% on a 30-year ($1029 PITI).
>We're in our early 30's, no children, no debt aside from the house.
>But we also really can't say how long we'll be in the home. Almost
>definitely not for the life of the loan, probably not more than 5
>years.
>I know that, at the very least, we should do one of the no-cost
>refinancings and get the instant savings. But here's what I'm sure is
>the dumb question-- according to the amortization calendar, I currently
>pay down about $440 of principal each month (when including the extra
>$300 that I pay on top), whereas if I had the 15 year no-cost refinance
>loan at 5.5%, I'd be paying down about $240 in principal each month to
>start with. It just seems like you'd want to be paying as much
>principal as possible, which is what I'd be doing with the 30-year
>loan. What am I missing here?
Something's wrong with your "if I had the 15 year no-cost refinance loan at
5.5%, I'd be paying down about $240 in principal each month to start with".
Your PITI numbers for the new loans imply a principal balance of roughly 129250.
On a 15 year 5.5% mortgage, that starts paying down principal at 464 a month
(which jibes with what you're paying off in principal now, since you're
currently paying off your original loan at about a 16 year rate).
Posted by John Weiss on July 1, 2005, 4:22 pm
A couple points:
"No cost" loans often mean only "no up-front fees" -- the fees are
rolled into the interest rate or added to the loan principal.
With the extra $300/month principal you are paying, your term is being
reduced substantially -- it is effectively no longer a 30-year loan, but
more like a 12- or 14-year loan (I don't have a calculator handy to figure
it exactly).
You can save more interest by refinancing for the 5.5% loan and continuing
your $1400 payments. Whether or not you want to do that is up to you,
especially if you plan to sell within 5 years. The tradeoff between paying
more principal and saving that extra $300 or $371/month depends on what you
do with the money. IF you can invest it at >6.4%, you might make out better
paying only what is required, and saving up for the down payment on the next
house. If you can't get a guaranteed 6.4% and/or might spend it, keep doing
what you're doing.
> I've been reading so much about mortgage refinancing that I think I'm
> confusing myself. We currently have a 30-year mortgage at 6.375% on a
> house that we've only been in for a year. The monthly PITI is about
> $1100. We've found that we can afford pay an extra $300 of principal
> each month, so the total payment is $1400.
> Now I'm finding that I can refinance to a "no cost" loan at 5.5% on a
> 15-year ($1330 PITI) or 5.875% on a 30-year ($1029 PITI).
> We're in our early 30's, no children, no debt aside from the house.
> But we also really can't say how long we'll be in the home. Almost
> definitely not for the life of the loan, probably not more than 5
> years.
> I know that, at the very least, we should do one of the no-cost
> refinancings and get the instant savings. But here's what I'm sure is
> the dumb question-- according to the amortization calendar, I currently
> pay down about $440 of principal each month (when including the extra
> $300 that I pay on top), whereas if I had the 15 year no-cost refinance
> loan at 5.5%, I'd be paying down about $240 in principal each month to
> start with. It just seems like you'd want to be paying as much
> principal as possible, which is what I'd be doing with the 30-year
> loan. What am I missing here?
> sffleague@yahoo.com
Posted by CL (dnoyeB) Gilbert on July 5, 2005, 10:18 am
sffleague@yahoo.com wrote:
> I've been reading so much about mortgage refinancing that I think I'm
> confusing myself. We currently have a 30-year mortgage at 6.375% on a
> house that we've only been in for a year. The monthly PITI is about
> $1100. We've found that we can afford pay an extra $300 of principal
> each month, so the total payment is $1400.
>
> Now I'm finding that I can refinance to a "no cost" loan at 5.5% on a
> 15-year ($1330 PITI) or 5.875% on a 30-year ($1029 PITI).
>
> We're in our early 30's, no children, no debt aside from the house.
> But we also really can't say how long we'll be in the home. Almost
> definitely not for the life of the loan, probably not more than 5
> years.
>
> I know that, at the very least, we should do one of the no-cost
> refinancings and get the instant savings. But here's what I'm sure is
> the dumb question-- according to the amortization calendar, I currently
> pay down about $440 of principal each month (when including the extra
> $300 that I pay on top), whereas if I had the 15 year no-cost refinance
> loan at 5.5%, I'd be paying down about $240 in principal each month to
> start with. It just seems like you'd want to be paying as much
> principal as possible, which is what I'd be doing with the 30-year
> loan. What am I missing here?
>
> sffleague@yahoo.com
>
Being 30 I think its time for more agressive investment. Mortgage is
good, and you seem to have a nice one. But dont put your extra money
into your mortgate. Put it into a higher return investment.
Well I actually can't tell you to do that. But I can tell you to manage
your overall investments. And at 30 you should have a bit more risk in
your protfolio to put that 300 in, instead of the mortgate. Put some in
the mortgate perhaps, but you gotta get balanced if yoru not.
I wouldnt refinance. They ALWAYS make sure it takes you x years to
break even before you make any savings and this is usually more than 5.
They they say its no cost, they are probably just liers. I been to
too many loan meetings after weeks of discussion where they bring out
the 'truth' and its all I can do to contain myself and walk out. Pisses
me off just to think about it now.
--
Respectfully,
CL Gilbert
Posted by v on July 8, 2005, 12:03 pm
On Tue, 05 Jul 2005 10:18:45 -0400, someone wrote:
>> I know that, at the very least, we should do one of the no-cost
>> refinancings and get the instant savings...
> They they say its no cost, they are probably just liers.
Yup. Pretty much no such thing as a "no cost" refi. Just no "up
front" or "cash" cost - but there is likely a fee or cost or increased
amount owed, that is built into the loan terms somewhere. Asking
rhetorically - what if you were to do the "no cost" refi, and then
turn around and want to pay it off (or refi it again) the very next
day - would you REALLY only owe what you used to owe?
Don't finance your closing costs for the refi over 30 years.
Reply to NG only - this e.mail address goes to a kill file.
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>confusing myself. We currently have a 30-year mortgage at 6.375% on a
>house that we've only been in for a year. The monthly PITI is about
>$1100. We've found that we can afford pay an extra $300 of principal
>each month, so the total payment is $1400.
>Now I'm finding that I can refinance to a "no cost" loan at 5.5% on a
>15-year ($1330 PITI) or 5.875% on a 30-year ($1029 PITI).
>We're in our early 30's, no children, no debt aside from the house.
>But we also really can't say how long we'll be in the home. Almost
>definitely not for the life of the loan, probably not more than 5
>years.
>I know that, at the very least, we should do one of the no-cost
>refinancings and get the instant savings. But here's what I'm sure is
>the dumb question-- according to the amortization calendar, I currently
>pay down about $440 of principal each month (when including the extra
>$300 that I pay on top), whereas if I had the 15 year no-cost refinance
>loan at 5.5%, I'd be paying down about $240 in principal each month to
>start with. It just seems like you'd want to be paying as much
>principal as possible, which is what I'd be doing with the 30-year
>loan. What am I missing here?