Posted: Thu Jan 21, 2010 4:51 pm Post subject: If I pay an addition amount on my mortage, is there a calcul
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loan 110865 @ 6.25% for 30 years. I have balance of 107,458.71 and want to pay down to 100,000. I have made 30 payments. Would i be better to refinance 100,000 @ 4.875 & start over @ 30 years again plus 3,000 closing.
It's a good idea to make extra payments towards the mortgage principal and pay off the loan early. It helps you save a lot of money in interest over the life of the loan.
Using the refinance calculator, I find that if you refinance the balance mortgage amount as $100,000 (since this is amount you want to refinance) to a 4.88% mortgage, your mortgage payments go down by almost $153.40 each month, but you end up paying additional amount of $1,334 in interest over the entire loan term. Thus, you save no money over the life of the mortgage and it will also take you 28 months to recoup the closing costs you will pay for the refinance.
However, if you make extra payments towards the mortgage principal, you can pay off the loan earlier than the scheduled time and save a lot of money in interest. If you refinance the loan balance of $100,000 at the interest rate of 4.88%, your monthly payments reduce by $153 (approx.). Now, say, if you continue making the current payments on the refinanced mortgage and pay the extra amount of $153 towards the principal, using the mortgage payoff calculator, I find that you will be able to save $38,216.28 in total amount of interest paid over the entire term of the loan.
Thus, if you refinance the current loan at 4.88%, your monthly payments will decrease, but you will have to pay more in interest payments. However, if you refinance and at the same time, make extra payments towards the principal, you can save substantial amount of money in interest payments and can pay off the loan early.
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memehartman
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