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04-18-2008, 04:38 PM
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#1
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Recycles dryer sheets
Join Date: Oct 2007
Posts: 463
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Mortage Refinance Math?
Okay, how does this work? (Numbers are made up; I'm looking for the underlying math.)
Assume I took out a $200,00 30-year fixed mortage at 6% several years ago, have been making extra principal payments, and the statement now shows that I have ten years to go if no more extra principle payments are made.
If a ten-year fixed mortage at 6% is available with no closing costs, if I refinance with it for the remaining principal balance, do I come out ahead, exactly even, or behind? How does the math work on this? :confused:
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TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future
"I've traded love for pennies, sold my soul for less" -Jim Croce, Age
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04-18-2008, 04:49 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Jun 2006
Location: Boise
Posts: 3,995
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Depends on how you mean "the statement now shows that I have ten years to go" and what you mean by "ahead" and "behind".
If you mean that if you continue to make the original scheduled monthly payment then your balance will be zero in ten years, then refinancing to the new mortgage would put you basically even. The one caveat is that usually in a refinance you will end up with an extra month in there where you don't pay down the balance, so in all likelihood you would pay the new 10 year loan off in something like 10 years and 1 month from now.
2Cor521
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04-18-2008, 06:48 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Jan 2007
Posts: 1,064
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In case you want to fool around with scenarios:
Karl's Mortgage Calculator
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04-18-2008, 08:36 PM
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#4
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Mar 2003
Posts: 17,028
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The treasure trove, from a finance professor who spent his whole career studying all things mortgage: The Mortgage Professor's Website
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"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."
- Will Rogers
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04-18-2008, 08:42 PM
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#5
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Recycles dryer sheets
Join Date: Dec 2006
Posts: 427
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I would do the math in Excel using the PMT function and do your own amortization, however, 2Cor521 is right - you would break even.
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04-19-2008, 05:31 PM
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#6
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Recycles dryer sheets
Join Date: Oct 2007
Posts: 463
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Thanks for the replies!
__________________
TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future
"I've traded love for pennies, sold my soul for less" -Jim Croce, Age
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04-19-2008, 09:32 PM
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#7
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 25,407
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 Quote:
Originally Posted by JohnDoe
I would do the math in Excel using the PMT function and do your own amortization, however, 2Cor521 is right - you would break even.
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This is what I used when calculating my mortgage and it worked great - you can play all sorts of scenarios for yourself. Many moons ago when DD was 5 years away from college I wanted to know how much per month to pay so that my mortgage ended at the same time I started paying college fees. I used my Excel spreadsheet and paid it off in exactly the time table it calculated for me.
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