<< Back to all Blogs
Login or Create your own free blog
Layout:
Home > Running the numbers for the refinance
 

Running the numbers for the refinance

July 14th, 2010 at 07:30 pm

OK so I crunched some numbers......I estimated the mortgage at $131,000.00 even though we are at $131,850.00 right now, I figured that would be easiest to estimate.

Scenario #1
-Paying off the current mortgage without any additional payments.
-Monthly payment $940
-19 years left on 20 year mortgage at 4.8%
-Payoff date 08/2029
-$68,936.29 paid in interest from now till payoff

Scenario #2
-Paying off the current mortgage and paying $200 extra per month
-Monthly payment $940 + $200
-19 years on 20 year mortgage would be paid off in 15
-Payoff date 07/2024
-$48,840.12 paid in interest from now till payoff

Scenario #3
-Refinance to 15 year mortgage at 3.75%, no extra payments
-Monthly payment of $952 (only increases $12!)
-15 years
-Payoff date 09/2025
-$40,479.18 paid in interest from now till payoff

Scenario #4
-Refinance to 15 yr and pay $200 extra per month
-Monthly payment of $952 + $200
-15 years would be paid off in 12 years
-Payoff date 04/2022
-$31,085.88 paid in interest from now till payoff

So the winner is Scenario #4!! The payment will only go up $12 and we would save $28K in interest if we compare the regular payment scenarios and $17K if we compare the extra payment scenarios plus the benefit of automatically taking 4 years off. I am going to apply to our bank online tomorrow and also fish around and see if I can find a similar rate for less closing costs too. I am not interested in going out of the local area so hopefully I can find something good. But I do really like the bank we are using, they always apply my principle payments correctly, have good internet bank, great customer service, and the BEST free cookies in their lobby! But even if the costs were about $5K we are still saving so much it would be a wash on the closing costs.

8 Responses to “Running the numbers for the refinance”

  1. creditcardfree Says:

    Isn't compound interest amazing!

  2. whitestripe Says:

    the scenarios that include refinancing: have you included the added costs of the refinance, whatever fees and charges they may be? (if any?)

  3. Apprentice Bliss Hunter Says:

    Great work !

  4. MonkeyMama Says:

    This is why I said the refi was mostly a no brainer.

    $5k borrowed at 3.75% (for costs) = $15/month, in addition. Won't change #3 or #4 substantially.

  5. Looking Forward Says:

    Awesome!

  6. dfeucht Says:

    Can I offer up #3 as the no-brainer with the extra $200 going to a dedicated fund for paying off the home if you so choose? If you pay $952 on the 15 year in April 2022 (your payoff month) you would have a balance of around $35 - $36K. If you can earn 5% after tax on your $200 a month over that 12 year period you would have $38K (at 7% after tax you would have $44K). That would give you the option at that time to pay off the mortgage with a little extra cash OR alternatively it can act as an emergency fund along the way should anything go wrong.

    Obviously if you don't trust yourself to dedicate that $200 EVERY MONTH to the side account it doesn't work, but it gives you some flexibility/ cash on hand and still achieve the result you desire should you so choose.

    Just something to think about.

  7. Banker Gurl Says:

    Thanks for the comments and suggestions. Yes there would be closing costs, probably $4K-$5K. I re-ran scenario #3 and #4 with $4K added to the mortgage balance and the new interest amount and payoff dates.....it doesn't change it much.
    Scenario #3
    -$135,000.00 (Balance plus estimated closing costs)
    -Refinance to 15 year mortgage at 3.75%, no extra payments
    -Monthly payment of $952 (only increases $12!)
    -15 years
    -Payoff date 08/2025
    -$40,479.18 paid in interest from now till payoff

    Scenario #4
    -$135,000.00 (Balance plus estimated closing costs)
    -Refinance to 15 yr and pay $200 extra per month
    -Monthly payment of $952 + $200
    -15 years would be paid off in 12 years
    -Payoff date 05/2022
    -$32,256.56 paid in interest from now till payoff

  8. Banker Gurl Says:

    dfeucht - I think that is a great suggestion too....unfortunatley it seems like something always comes up (such is life!) and I am worried that it would be used for something else. Thanks for the thought though, I will definitely think about it!

Leave a Reply

(Note: If you were logged in, we could automatically fill in these fields for you.)
*
Will not be published.
   

* Please spell out the number 4.  [ Why? ]

vB Code: You can use these tags: [b] [i] [u] [url] [email]