Time for another Mortgage?

[PRH_RU]

Ok need to ask a questions:

Current situation:

290K owed @ 3.75 with 27.25yrs left with payment of 2022/month

i have the option to refiance @ 3.75 for a 20 yrs with 0 closing costs making the payment 2042/month

If i refinance don't i pay less over the duration of the loan in interest. seems like a no brainer to me but a buddy of mine who is in the industry say not to do it just pay more per month on my current loans..

it does not compute to me?

some one explain

 

[RUns_w/scissors]

Ok need to ask a questions:

Current situation:

290K owed @ 3.75 with 27.25yrs left with payment of 2022/month

i have the option to refiance @ 3.75 for a 20 yrs with 0 closing costs making the payment 2042/month

If i refinance don't i pay less over the duration of the loan in interest. seems like a no brainer to me but a buddy of mine who is in the industry say not to do it just pay more per month on my current loans..

it does not compute to me?

some one explain

If you're paying the same interest rate with zero closing costs just pay the extra $20 per month on your own towards principle and you won't need to deal with the hassle of the paperwork.

 

[yesrutgers01]

Hawk can help you. I can too but since he is a sponser, cool dude and friend, I'll let him respond.
Anyone else...don't listen to

 

[M1stman]

Do not refinance. You're borrowing money at 3.75%. If you invest that extra money each month, you're almost guaranteed to beat the 3.75% interest rate by a wide margin over the life of the loan.

 

[Lion8286]

Ok need to ask a questions:

Current situation:

290K owed @ 3.75 with 27.25yrs left with payment of 2022/month

i have the option to refiance @ 3.75 for a 20 yrs with 0 closing costs making the payment 2042/month

If i refinance don't i pay less over the duration of the loan in interest. seems like a no brainer to me but a buddy of mine who is in the industry say not to do it just pay more per month on my current loans..

it does not compute to me?

some one explain

Something doesn't make sense. Switching from a 30 to 20 year loan at that amount owed would mean a $300-400 increase in your monthly payment given how early on it is in the loan period. Also, you should take out the Taxes and Insurances (which remain constants) when comparing potential savings.

This site is helpful and allows you to adjust the rate and term.

http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

 

[RUJohnny99]

Ok need to ask a questions:

Current situation:

290K owed @ 3.75 with 27.25yrs left with payment of 2022/month

i have the option to refiance @ 3.75 for a 20 yrs with 0 closing costs making the payment 2042/month

If i refinance don't i pay less over the duration of the loan in interest. seems like a no brainer to me but a buddy of mine who is in the industry say not to do it just pay more per month on my current loans..

it does not compute to me?

some one explain

Those numbers don't add up.
$290,000 on a 30 year @3.75% would be $1350
$290,000 on a 20 year @ 3.75% would be $1790

 

[FastMJ]

You're definitely leaving out some relevant facts here. It might make sense to refi to a shorter term but only if you are reducing the rate in the process or moving from an adjustable to fixed rate to lock in the payment.

 

[rutgersal]

Those numbers don't add up.
$290,000 on a 30 year @3.75% would be $1350
$290,000 on a 20 year @ 3.75% would be $1790

Property taxes likely make up the difference.

 

[RUJohnny99]

Property taxes likely make up the difference.

Yes, but you don't get a break on property taxes by reducing the term of your loan.

 

[PRH_RU]

ok..i just checked and my current payment is a little lower ($1932 ) as i was already paying extra principle ($90). the new loan is described as such

20 year fixed - $290K Loan Amount – 3.75%
Principal & Interest Payment: $1719/mo
Escrow Payment: $333/mo (est.)
Total Monthly Payment: $2052/mo (est.)
Closing Costs: $0

so for 30 bucks extra a month i pay off faster by 7 yrs? does that make sense?

 

[TonyLieske]

The "estimated" escrow payment could easily be wrong. Is that the figure you pay every month, or just some estimate provided by an online mortgage calculater? If it isn't your actual information, that seems to be the most likely culprit.

FWIW, my house only cost me ~155k and my monthly escrow payment (taxes + insurance) is more than that.

 

[PRH_RU]

I moved to NC where my property taxes are less then 1% of my homes value aka 380K purchase and i pay $3246 a year in property tax...800 for insurance

 

[RUskoolie]

There are always closing costs...

 

[PRH_RU]

There are always closing costs...

They are rolled into the rate....

 

[BellyFullOfWhiteDogCrap]

How much in interest will you pay if you stay w/ the 30 for the remainder of the loan. Compare that to the total interest on the 20.

 

[patk89]

ok..i just checked and my current payment is a little lower ($1932 ) as i was already paying extra principle ($90). the new loan is described as such

20 year fixed - $290K Loan Amount – 3.75%
Principal & Interest Payment: $1719/mo
Escrow Payment: $333/mo (est.)
Total Monthly Payment: $2052/mo (est.)
Closing Costs: $0

so for 30 bucks extra a month i pay off faster by 7 yrs? does that make sense?

You state that you are already paying an extra $90/month so if you keep doing that, your mortgage will be fully retired well in advance of the legal term. So, you need to compare apples to apples. Back out the amount you are pre-paying to make a fair comparison. Check your current escrow/tax and compare it to what is being shown in the new offer. But, fundamentally, why give away the free option to not prepay and lock yourself into a shorter term mortgage without getting a better rate? Shorter term mortgages have lower rates than longer term mortgages. At some point market rates will rise and you will benefit by not prepaying, simply invest the cash in a money market that pays a higher rate (income tax adjusted) and pay the fixed low rate to your mortgage provider.

 

[Upstream]

ok..i just checked and my current payment is a little lower ($1932 ) as i was already paying extra principle ($90). the new loan is described as such

20 year fixed - $290K Loan Amount – 3.75%
Principal & Interest Payment: $1719/mo
Escrow Payment: $333/mo (est.)
Total Monthly Payment: $2052/mo (est.)
Closing Costs: $0

so for 30 bucks extra a month i pay off faster by 7 yrs? does that make sense?

Something doesn't add up.

If you have 27 years left on your current mortgage, at an interest rate of 3.75%, and a loan value of $290K, then your monthly payment should be about $1425. Add the estimated $333 escrow and the $90 extra you prepay, then your current payment should about $1848. But you are paying another $84 on top of that.

Do you have a breakdown of your current payment, showing the amount paid toward the loan, the amount for escrow, etc.

Or are you sure you have 27 years left on your mortgage (25 years makes sense for your payment at a loan value of $290K, and 3.75% interest rate).

[in edit -- I misread the OP's posts and thought his $1932 payment included the $90 prepay. But it is without the $90 prepay. In the first post in this thread, he indicates that his payment is $2022 including the $90 prepay.]

 

[TonyLieske]

Or are you sure you have 27 years left on your mortgage (25 years makes sense for your payment at a loan value of $290K, and 3.75% interest rate).

This is a good question. If you have been paying an extra $90 a month for the last three years, you may have already cut several years off the mortgage anyway. FWIW, most banks have website that you can sign up for to check your mortgage status online, which usually include an up to date amortization schedule.

 

[mdk01]

If you keep the current mortgage you have the ability to do precisely what refinancing for a shorter term would do but without the closing costs. Just continue to prepay as you are currently doing. In addition, if you encounter unexpected expenses during the life of the mortgage you could revert to paying it on a 30 time frame and lower your payment. That option would not be available if you refinance.

Frankly, I see no benefit in refinancing under those terms.

 

[Upstream]

This is a good question. If you have been paying an extra $90 a month for the last three years, you may have already cut several years off the mortgage anyway. FWIW, most banks have website that you can sign up for to check your mortgage status online, which usually include an up to date amortization schedule.

Good point. If he has been paying an extra $90 per month for the past 3 years, then the length of his current loan would be shorter, as he has already pre-paid some of it off.

So, given his original post, which says that he is paying $2022 per month, and assuming that includes his $90 extra payment and $333 escrow, then his monthly P&I is $1599. For a 30 year mortgage, at 3.75 percent, that works out to an original loan value of about $345K. But if he prepays an additional $90 per month, then 3 years into the loan, the current loan value would be $316K.

Again, something does not add up in the numbers that the OP provided.

 

[RutgersUnion]

PENFED has a 15/15 ARM @ 3%. Most will sell within 15 years anyway.

 

[M1stman]

PENFED has a 15/15 ARM @ 3%. Most will sell within 15 years anyway.

And if they don't plan to, the ARM will help to motivate them!

 

[FastMJ]

Don't do this refi since the rate is the same. If you want to get aggressive, do the 15 year loan term at 3%. You might be able to do a bit better, say 2.875% on a 15 year fixed. I just refinanced to a 15 year fixed 3 months ago at 3% with zero points. I was actually at a lower rate previously, but that was a 5 year adjustable. I wanted to lock in a fixed rate. In your case, you have an excellent rate already and it is fixed.

 

[PRH_RU]

Good point. If he has been paying an extra $90 per month for the past 3 years, then the length of his current loan would be shorter, as he has already pre-paid some of it off.

So, given his original post, which says that he is paying $2022 per month, and assuming that includes his $90 extra payment and $333 escrow, then his monthly P&I is $1599. For a 30 year mortgage, at 3.75 percent, that works out to an original loan value of about $345K. But if he prepays an additional $90 per month, then 3 years into the loan, the current loan value would be $316K.

Again, something does not add up in the numbers that the OP provided.

You know your stuff and I am not trying to be cryptic at all just not sure what details are relevant or not ...the original purchase price was 368,500 I put 40k down. But still had PMI. That went away in October when I had the house apprised at 380 and have been paying additional principal when ever I can

The ~290k is the value owed as of today according to the Wells Fargo website. The 27 years comes from it being a 30yr fixed that started in October of 2012.

So looks like most are stating stay put and just pay as much as possible. Should I try to lower the rate to 3.00 with a 15yr and 2500 in closing costs

 

[RUJohnny99]

You've lopped off $38,000 just doing what you're doing. No need to pay somebody a closing fee for doing what you're smart enough to do on your own.

Refi-ing to a 15 year will just make your monthly payment go up & put another $2500 in the pocket of the bank.

 

[Upstream]

PRH --

OK. If your original loan was a 30 yr mortgage, at 3.75%, with an original loan value of $328,500, then your loan payment (just P&I, excluding escrow, PMI, or additional prepayments) is $1521. The current value of your loan, assuming no prepayments would be about $312K.

Since your current loan value is $290K, you certainly have done a good job paying off some of the loan. Even if you don't prepay anything else, you only have about 24 years left on your loan. But if you prepay an additional $90 per month every month going forward, your mortgage will be paid off in 22 year. The total interest you will pay going forward is about $136K.

If you refinance to a 20 year mortgage, your monthly P&I payment will be $1719, about $108 more than you are paying now (including your extra $90 per month). You will pay off the mortgage in 20 years, 2 years earlier. And your total interest will be about $123K.

That is certainly a savings.

But you don't have to refinance to realize that savings. You can just increase your additional payment by the $108. You'll pay off the mortgage in the same 20 years, and you'll reduce your total interest to the same amount. But you'll retain the flexibility to stop the additional payment if you need the money for something else.

 

[PRH_RU]

Thanks for all the help!

I will sit on it and just pay additional principal when I can.

Goal is to pay of the house in the next 7 years as my retirement is already in great shape.