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dragon93
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 chrisgummerson
Community Expert
Joined: 29 Apr 2010
Posts: 704
Location: La Palma, CA
9.98 Dollars($)
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dragon93433
Joined: 06 Jan 2012
Posts: 3
1.49 Dollars($)
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chrisgummerson
Community Expert
Joined: 29 Apr 2010
Posts: 704
Location: La Palma, CA
9.98 Dollars($)
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dragon93433
Joined: 06 Jan 2012
Posts: 3
1.49 Dollars($)
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tomburris
Community Expert
Joined: 03 Oct 2007
Posts: 135
Location: North Dallas
19.12 Dollars($)
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dragon93433
Joined: 06 Jan 2012
Posts: 3
1.49 Dollars($)
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sabrinatoss
Community Expert
Joined: 16 Jan 2011
Posts: 516
Location: Australia
82.74 Dollars($)
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John g
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Posted: Tue Jan 10, 2012 9:04 am Post subject:
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You may have a financial calculator but sounds like there are many “apples and oranges” floating around. You need to speak with a LO to get some advice and come armed with a recent mortgage history so LO will have some third-party verification of your numbers which appear to be a bit garbled.
If your existing mortgage has a fixed rate, your monthly P&I is $1,701.28, not $1,738. I assume by “14 years left” you mean you’ve made 12 monthly payments on your existing mortgage. IF you’ve been paying $2,179.28 [$1,701.28 + $478] for 12 months and continue paying this amount, you have 128 months remaining and an effective 140-month mortgage. Current mortgage balance under this scenarios would be around $212,735. So on your proposed refinance, you’re INCREASING your loan balance significantly and INCEASING your remaining loan term. Doesn’t sound from your retirement comments as if this is what you want to do.
Tomburris is 100% correct about the 3.50% rate. Even at 3.25%, you should have a bit under $1,000 to offset that $2,600 fee. Forget that $27,828 savings “over the life of the loan” bit. It’s a sucker bet at best – remember the cost of capital effect on NPV and the non-intuitive results of exponential functions. Look at the scale of a slide ruler if nothing else. Better strategy is to force compare existing and refinance alternatives at the lower of projected remaining loan terms and shot for a break-even point on costs in a two to three-year range. Viewed this way even at the 3.5% rate and financing the $2,600 you’d break even around 23 months so technically falls within the 2 ro 3-year payback but your life-of-the-loan UNDISCOUNTED savings are only a bit over five grand. Reduction of around $35/month on an effective 119 month term so that’s a real snoozer. Keep paying the $2,179.28 and you get only marginal decrease in loan term. Shorter term mortgages are strange this way – again the effect of exponential calculations. |
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