We are on target to pay off our 30 year loan in 15 years. About halfway there now. I'm wondering if refinancing could get it done sooner or cheaper.
most mortgages are designed where the first half of the mortgage is heavily weighted to you paying interest rather than principal.
Assuming you have no prepayment penalties on your current loan, the only way refinancing will accelerate your payoff date is of the rate is lower (and by enough to offset any costs involved in the refinancing).
That’s pretty simple and obvious, but most people who refi are extending their term back out to 30 years, which can bring monthly payments down even if it doesn’t actually save nominal or real dollars over the life of the loan. To most people, lower monthly payment = saving money.
This is only if you are paying the original amortization schedule. If @Tommy is on pace to pay off his 30 year loan in 15 years, then he is prepaying - every dollar of prepayment is 100% principal.
Basically what they're saying is that any prepayment won't come off the principle in terms of calculating your interest until the first of the month. So if you make a prepayment on the 15th, you'll technically still pay the interest amount on that prepayment until it is applied 15 days later. So for example, if your interest rate is 4% and you prepay an extra $1000, you'll end up paying an ~$3 in interest by paying sometime after the first of the month.
Tommy, you can go online and use a mortgage calculator. Plug in what you have now and put in the added principle payments. Then put in a new loan with the new interest rate and additional principle payment if that applies. You should be able to run an ROI and see which one benefits you.
What they are saying is that if you make a prepayment (or payoff the loan) after the 1st of any month, the interest cost for that period is based on the current balance for a full 30 day period (which excludes any prepayment you may have made in that month).
It's a more significant cost if you are paying off the loan. Interest is charged for 30 days no matter what day you paid it off.
ie.
With a conventional loan, if you pay off the loan on the 5th of the month, you are only charged an additional 5 days of interest in the payoff amount
With an FHA loan originated prior to 1/21/15, you will pay a full 30 days additional interest in the payoff amount.
Word is that by the 3rd quarter, rates will be back in the 3's.
Heaven Forbid. That means the economy is shite again, we don’t need that!!!!!Does your source have word on when they'll be in the low 2's?
Heaven Forbid. That means the economy is shite again, we don’t need that!!!!!
30 year fixed is standard in the US, though, many opt for 15 year if they can afford it.15 Year fixed rates? WTF?
Longest we can get here is 5
I don't know how the system works today, but I know that there used to be a way to get a refund from the mortgage insurance premiums paid on FHA loans if you refinance. That might be worth looking into if it can help offset any refinance costs.
Also, don't let anyone pull your credit just to see if they can get you a better rate. Credit pulls can be costly demerits on your credit score, particularly when they are not tethered to a new loan that resulted from the pulls. You should be able to get a pretty good idea of what rates and fees you would qualify for when shopping for a new loan. From there, as others have mentioned, it's just a matter of doing the math to see if it will save you money over the life of the loan.