Any mortgage/finance guys here? Need advice

[shibbershabber]

Looking at refinancing my home right now...

Total loan amount will be about 158k-160k (depending on fees rolled into loan)

Looking at doing a 20yr to get paid off faster.

Paying about 1200/mo now (3yrs into a 30yr load at 4.8%)

I can refi into a 20yr at 3.75% and have about the same payment ($932 + tax/ins)... but paid off sooner of course.


Should I do the 20yr...

OR

I can do a 25yr at 3.375% for a payment of $776 + tax/ins

Is it better/faster/wiser to just do the 20yr or take the lower payment/longer term but ADD $200 month in extra principle?


Im leaning towards the 25yr... since adding $200 per month extra principle brings the payment about the same as the 20yr......

BUT, according to a couple online calculators, doing the extra principle like this pays me off in LESS than 20 years.... plus I have that buffer of a lower payment just in case we hit hard times...


Thoughts?

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[slimmer13]

Not a finance guy, but I like the longer term with the lower interest rate while still making the higher payments. Toward the beginning, you will only be paying about $200 or so in principle and the rest will be interest. By paying an extra $200, you will essentially be making double payments. Keep that model up (paying double the principle) as long as possible.

 

[Gonzales]

Yes, go for the longer mortgage. 30 year, if they are willing to keep the interest rate low.
Then in good times, pay more on the principle first. On your extra payments, you may have to specify that the extra payment should be applied to the principle balance first.

And don't finance through Wells.....

Also, if you refinance now, your new loan balance will be higher than the original loan, if you roll the costs into the new mortgage! If you can swing paying those fees now. It will save you a small fortune over the life of the loan.

 

[CoastRange57]

If you are handling the $ 1,200 payment fine, then go for the 25 year note and add $ 300 a month to it straight to principle and you will still be under your payment now. That gives you $ 3,600 a year extra on the principle and over 10 years, $ 36,000. You should be able to pay it off in 15 years.

The fastest way to build retirement wealth is to get rid of that house payment, and then start adding at least half that much to your retirement accounts. Paying down your house is just like adding it to a IRA.

Good Luck !!!

 

[jbett98]

Have you looked at making bi-monthly payments instead of just once a month.

How To Save Thousands and Shave Years off Your Mortgage

Splitting your monthly mortgage payment into biweekly payments could save you thousands of dollars on interest over the life of your home loan.

www.thebalance.com

 

[Stomper]

I like 15yr mortgages, they also tend to have lower APR's... I have 4yrs 10mos left on mine and it's free and clear with only annual property tax to pay from then onwards. I can retire in a little over 9yrs.

 

[The Heretic]

I am not going to refi since I will be selling when the market comes back, maybe even this year or next, and it isn't worth the fees in that case.

However, I went with 30 year fixed when I bought the property, because I wanted the lower payment, knowing that if something happened, like if I lost my job (which I just did), then I could more easily afford the lower payment.

If you can get an interest rate for the longer term loan that is comparable, then I suggest doing that - unless you are very sure of your income. Then you can just make additional payments (which I have), to get the principal down (you will probably need to tell them the payment is for the principle only or they will maybe think you are making advance payments - which my lender assumed).

However, longer term loans usually come with a higher rate because the rate can go up later over time and the lenders take that into account.

It just depends on the difference in rates and what risk you are willing to take with a higher mandatory payment.

 

[American123]

Used to work for US Bank. Did home loans, other things etc.

Lots of ways to look at this, but simply put, you have to decide what is important for you. Is it to save on the APR by shortening the term at the cost of a higher regular payment? Or is it to have the lowest possible required monthly payment at the expense of a higher interest rate and longer term?

Mortgage calculators are great for looking at what your options can potentially save you.

Personally, I tend to favor the concept of getting the longest term, lowest monthly payment, but then paying additional principal as much as possible. That way, when you have money, you can cut your mortgage down very quickly, if you fall on hard times, you don't have to make up such a large payment. I like to consider it like a type of safety net.

I'm not going to look at the numbers right now, but if memory serves me right for example. If you did a 30 year term and paid 1 full payment as additional principal every year, it would have it paid off in 18 years.

The key being whether someone has the fortitude to stick to the plan by themselves, or do they need their feet held to the fire by a mortgage payment breathing down their neck.

 

[Gonzales]

I just remembered. Be sure to make sure there is no 'Early Payoff Penalty' clause on the mortgage. This is something lenders try to sneak into the terms. So if the total cost of your $150,000 mortgage is $450,000 with interest over the full life of your mortgage, you will be forced to pay the whole $450,000!

Not the actual principle + accrued interest, if you make extra payments towards the principle.

 

[CoastRange57]

I just remembered. Be sure to make sure there is no 'Early Payoff Penalty' clause on the mortgage. This is something lenders try to sneak into the terms. So if the total cost of your $150,000 mortgage is $450,000 with interest over the full life of your mortgage, you will be forced to pay the whole $450,000!

Not the actual principle + accrued interest, if you make extra payments towards the principle.

Yep. And depending on how you make your payment, you need to indicate and I would write a separate check or e payment. The payment books sometimes have a spot where you can indicate you are paying extra on the principle in the same payment. I would keep copies of the payment slip if so indicated on there.

 

[Oregonhunter5]

I just remembered. Be sure to make sure there is no 'Early Payoff Penalty' clause on the mortgage. This is something lenders try to sneak into the terms. So if the total cost of your $150,000 mortgage is $450,000 with interest over the full life of your mortgage, you will be forced to pay the whole $450,000!

Not the actual principle + accrued interest, if you make extra payments towards the principle.

I've never heard of this, but if it's true I'd bet that rate would have to be stupid low or a good attorney would beat that in court.

 

[Oregonhunter5]

Usually human nature is to have the best of intentions. But most humans can't stick to a goal with money. Forced huge payments can be good for many.

So glad I have no debt these days. I was a stress case with any debt.

 

[Decker]

Looking at refinancing my home right now...

Total loan amount will be about 158k-160k (depending on fees rolled into loan)

Looking at doing a 20yr to get paid off faster.

Paying about 1200/mo now (3yrs into a 30yr load at 4.8%)

I can refi into a 20yr at 3.75% and have about the same payment ($932 + tax/ins)... but paid off sooner of course.


Should I do the 20yr...

OR

I can do a 25yr at 3.375% for a payment of $776 + tax/ins

Is it better/faster/wiser to just do the 20yr or take the lower payment/longer term but ADD $200 month in extra principle?


Im leaning towards the 25yr... since adding $200 per month extra principle brings the payment about the same as the 20yr......

BUT, according to a couple online calculators, doing the extra principle like this pays me off in LESS than 20 years.... plus I have that buffer of a lower payment just in case we hit hard times...


Thoughts?

I'm not currently licensed in Washington but if you really would like to see some options I can run some scenarios for you and then have a coworker take you across the finish line if needed.

Rates are likely to drop in May so we can see what rate makes the most sense for your specific situation and pull the trigger on it when the rate hits that mark. We're doing that with about a dozen clients right now. Message me if you have other questions or need an online application link.

 

[Oregonhunter5]

Rates should of been launched to 12% for a home 7-8 years ago. Inflation is extreme

 

[joken]

I know you didn't ask, but I'd recommend a 15 year if you can afford it. The sooner you can become debt-free, the sooner you will truly be free. It takes a lot of discipline to make those additional payments.

 

[CoastRange57]

So glad I have no debt these days. I was a stress case with any debt.

Yeah, it is a pretty good feeling.