Refinance

[Starz26]

Originally Posted by yourchoice

I'm trying to wrap my head around this equation. I am contemplating it differently. My new 15 yr mortgage (quoted today) would raise my payments about $60, but it would shorten my term by 44 months. The additional cost (for the 15 years) associated with the new loan would be 180*60 = $10,800 plus my closing costs. Conversly my last 44 payments would result in (in P&I only obviously) a cost of over $28,000. Now, the value of the dollar and other related factors are difficult to quantify, but I still think refi-ing would be the best bet. Using the equation you formulated actually suggests me not doing it. I'm not sure what I'm missing. FWIW (if you want to calculate it) I would have to raise my payments of my current loan $150/month to pay it off in the same amount of time.

FWIW, I do not see myself moving for a long, long time.

Ahh, Thanks for pointing this out, I made a misstatement, the additional payment on the current loan would have to be for 15 yr or 180 months not the difference between the loans......

So new formula is:

1. How much additional principal do you have to put on the current loan to pay of within the term of the new loan? this = x

2. NEW loan term in months = Y

3. Difference in payment from new loan vs current loan = D

4. Closing costs = Z

Formula is: ((Y*X) - Z) - (D*Y) or Y(X-D)-Z


You are saving anything you would have to pay additional on the current loan to make the same terms so you total how much you would pay over to make the new term and you would pay this for the entire term.


Your loan: ((180*150)-closing costs)-(60*180) = $16,200 savings

So as long as your closing costs are not over 16,200 then it makes sense.

Then you can take into account the future value of money, etc....

Also, making $150.00 a month in extra payments is something completely differet than making $60 extra so......

Sorry for the confusion above.

[cbsmokin]

I closed a loan for a borrower yesterday on a 5/1 arm at 2.75%. All the 30's I'm seeing are in the 4's and the 15's are under that.

If your home can support the value in the current economy you can get a loan that you will never have to touch again.