Question


toddrws

compare refinance lower rate longer term?

I can drop my rate from 5.75 - 5.35. I have 25 years left. It would increase years to 30. I would save $70 a month on a 112000 loan. Is it worth the change and extend the load for the savings. There is no cost to refinance. If I apply the difference I would cut a year off the loan and 20,000 on interest. The remaining balance is 110,000 at 5.75 for 25+ years left. It is a modification of the current loan. No costs. It would expand the term to 30 years and lower the rate to 5.35. i would set up auto pay and add the difference

4 weeks ago - 2 answers

Best Answer

Chosen by Asker

Please don't be confused, refinancing does cost you. I know the marketing says differently but the lender captures their fees in a slightly higher interest rate. I suggest you shop around a bit. The equation you used to figure out that you would save $20k in interest is omitting the fact that you have already paid $30K in interest already, such that by refinancing back to a new 30 year loan, you will in fact be paying an additional $10k. And if you add the difference in payments over a year that only adds up to $840. I suggest you think about refinancing the better rate on a 25 year loan instead.

Source(s)

Realtor

by linkus86

4 weeks ago

Asker's Rating: 

Other Answers

I ran this through my hurdy-gurdy mortgage calculator. Here are some round numbers: I'll presume the original loan was for $112,000 and is not the current balance. Also, check carefully. The lender may add a couple of $1,000 for their fees into the re principal. That will cost you more and cut your savings significantly. Then these numbers I've given you are down the toilet. $112,000 @ 5.75% for 30 years = $653/ mo. Total interest w/o refinancing is $123,300. At the 25 year point, your principal balance is $103,900. You will have paid $31,100 in interest. Refi that remaining principal: $103,900 @ 5.35% for 30 yrs = $580 / mo. You'll save $73 / mo. Apply that $73 savings to the new refi and you'll pay it off in about 23 yrs, not the 1 yr someone may have told you. Remember, you've already paid $31,100 interest on the original loan. When you refi, you'll pay an additional $77,444 interest even with the extra $73 / mo applied. Total interest paid between the two loans = $108,500. So, your true interest savings is closer to $15,000 over the life of the two loans If you don't apply that $73 savings,you'll pay a total of $135,600 interest over the life of both loans. So, the lender can make more interest ($13,300) on that point. Many people don't apply their savings and that's what the lender is counting on. Many refi's in this scenario can mean much larger interest earnings on these accounts.

by Dan B- 4 weeks ago