yet another should i refi question

[ER_Hopeful]

I've been mulling over this the past couple weeks, so should I do another refi?

info:
6.5 years into the current 30 yr mortgate at 5.375%, remaining principal = $117k. PI=$827, PITI=$1080. I’m paying extra $400 each month, at this rate I could pay it off in about 10.5 years.

I checked amerisave.com(haven’t shopped around seriously), If I could refi at 4.125% with a 10 yr fix or 4.375% with 15 yr, should I do it? How do you run the numbers in this game ? Total cost for either loan is around $1500.

15 yr at 4.375%, PI = %872
10 yr at 4.125%, PI = $1172

 

[calmloki]

This is a site in which you can spend a bunch of time to your profit:

Mortgage Calculators

Something I normally fail to take into account is a realistic assessment of how long we'll be in the place getting financed.

 

[brogan007]

Look at an ARM

If you can pay off in 10 yrs with a 5%+ rate at the moment....why not look at the 5 or 7 yr ARMs...if you pay in the extra $ saved by the lower rates, + your existing principle overpay, you might make it in 7yrs. Currently 5 yr ARMs around 3.5%.
Most folks don't keep the mortgage longer than 5-7 yrs anyhow.
No big rush .... (imho) rates heading down as deflation destroys the world economy.

 

[rayvt]

I always compare the monthly interest cost (note: only interest, not PI or PITI) of my current mortgage vs. the current rates. If that is $XXX lower than what I'm currently paying, then I refi, otherwise I don't.

Actually, when I get a new loan I create a little spreadsheet showing the monthly interest cost for several rates, going down by steps of 0.125%, for my current balance. The rate that shows $100 savings is my new target rate.

 

[bank5]

I would definitely refinance to bring it down from 5.375%. I just did a no-cost refi for a 30 year @ 4.75%. When you shop around make sure to keep an eye on the closing costs -- amerisave and some others are notorious for tacking them on. I'm a big fan of the no-cost refi and you might want to look into it too since you'll be paying off the loan quickly.

 

[Texas Proud]

I always compare the monthly interest cost (note: only interest, not PI or PITI) of my current mortgage vs. the current rates. If that is $XXX lower than what I'm currently paying, then I refi, otherwise I don't.

Actually, when I get a new loan I create a little spreadsheet showing the monthly interest cost for several rates, going down by steps of 0.125%, for my current balance. The rate that shows $100 savings is my new target rate.

not the best way to do it... but if it works for you....


The TRUE savings is to calculate the P&I based on the timeframe of the loan you are looking to do..

So... a 15 year loan at 4.375 is $888, at 5.375 it is $948 or about $60 per month savings

The 10 year is about $70 per month savings...


Sooo... $1500 / $60 is 25 months to breakeven... then you save over $9k... but this is over a period of time... so present value not as much..

 

[rayvt]

Why would you include the principal in your computation of savings? The principal component of the monthly payment isn't a true cost to you. It's just shifting your own money around---from cash in your checking account to equity in your house.

The interest component, OTOH, *is* a pure cost to you. That's you giving money to the lender.

Nor does the timeframe of the loan enter into the picture. Each month you have to pay the interest on the current balance. Period. The amount of interest you have to pay this month is not affected by how many prior months you have paid, nor by how many succeeding months you have. Only by the actual balance this month.

On a 100K balance, one month interest at 4.375% is $365. AT 5.375% it is $448. $83/mo.

 

[Texas Proud]

Why would you include the principal in your computation of savings? The principal component of the monthly payment isn't a true cost to you. It's just shifting your own money around---from cash in your checking account to equity in your house.

The interest component, OTOH, *is* a pure cost to you. That's you giving money to the lender.

Nor does the timeframe of the loan enter into the picture. Each month you have to pay the interest on the current balance. Period. The amount of interest you have to pay this month is not affected by how many prior months you have paid, nor by how many succeeding months you have. Only by the actual balance this month.

On a 100K balance, one month interest at 4.375% is $365. AT 5.375% it is $448. $83/mo.

When you pay off a $100K loan... you pay only $100k in principal... anything over that is interest...

If you have two different time periods, the actual amount you OWE changes each month... using your example.. if one was a 30 year loan and the other a 15 year loan... the principal amount are now reduced to $99,888 for the one loan and $99,605 for the second... you are now not comparing apples to apples...

If you look at a 15 year loan vs a 30 year loan... you pay a LOT more in interest over that 30 years... but trying to calculate 'savings', you have to normalize the pay period... compare apples to apples..

So.. if I have 17 year left on a loan.. I can pay it off in 15 IF I WANT... so I calculate my payments at my current rate over 15 years...

I then calculate my payments at my 'new' rate over 15 years... that is my savings...

Sure, I can pay less per month in total by extending the loan... and your calculation tells me how much I could save THIS MONTH... but it does not tell me how much I save in total...

Notice... my calculation is trying to say how much you saved... not a 'total cost'...

 

[Stermanka]

thnx very much! me helped