refinance or pay extra to principal

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dvhug

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Post Posted: Sat May 05, 2012 5:49 pm    Post subject: refinance or pay extra to principal
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I have a 30yr mortgage with 5.875% interest rate. The original loan amount was $85,360, I've had the loan for 8 1/2 years, and the current loan balance is $69,069. My monthly P/I payment is $504.94, and I pay $150-200 extra on the principal every month.

I have no plans to ever sale the house & I have excellent credit. So, with what the rates currently are, 3.00+ percent, should I refinance to a 15yr fixed rate or should I just stay at my current rate & continue to pay the extra toward the principal?

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Post Posted: Sun May 06, 2012 8:08 pm    Post subject:
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Welcome dvhug,

As far as I can understand, refinancing your existing mortgage to a 15 year fixed rate loan will be a good option. As you plan to stay in the property for a longer period of time, you will be able to offset the closing costs which you will have to pay due to refinancing.

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Icon Mini Profile jveenstra
jveenstra
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Post Posted: Mon May 07, 2012 12:25 pm    Post subject: Refiannce
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I am assuming you pay $175 extra monthly for the purposes of this analysis (since you pay $150 to $200 extra monthly)

Presently, at 5.875%, you must pay $504.94 and you voluntarily pay $679.94.
That will pay off in 141 months and you will have paid $95,871

If you refinance to a new loan of $73,000 (I added $4,000 for closing costs and prepaids) at 15 fixed at 3.500%, your required monthly payment will be $521.86
If you pay that for 180 months you will have paid $93,935. That is $2,000 less than what you are doing now and your would pay $158 less monthly at the same time.

If you voluntarily pay $679.94,on the new loan, same as you pay now, that would pay off in 129 months and you will have paid $87,712.

So, refinance yesterday and the decide if you want to make just the required payment or pay extra every month.

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