refinance or pay extra to principal

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Post Posted: Sat May 05, 2012 5:49 pm    Post subject: refinance or pay extra to principal

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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Icon Mini Profile adonis

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

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
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Post Posted: Mon May 07, 2012 12:25 pm    Post subject: Refiannce

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.

John Veenstra, Mortgage Banker
Approved Funding Corp.
41 Grand Avenue
River Edge, NJ 07661
W: 201-833-0123
NMLS ID 178140
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