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Thu 27 May, 2010 09:27 pm
Home value app $190,000
owe app $125,000
current rate 6%
current payoff date 2030
Refinance to 4.5%
Flat fee of $1600+
1 origination fee and 1 discount point (1% of loan for each)
new loan approx $130,000 (so no fees out of pocket)
new loan would be about $200 per month less
However payoff date would move to 2040
However, if I were to continue to pay the additional $200 extra per month (same payments as now), I think it would move the payoff date back up to about 2030 where it is now. The difference being that I would have the choice of paying the extra $200 or not.
I've been here 10 years and plan to retire here.
I'll be about 70 in 2040 and I'd much rather have everything paid off at that time.
On the other hand, I have about 3 years left on a car note that is $325 per month. For the last 3 or 4 months, I've been paying an extra $300 per month on it to pay it off much earlier (about 1 year). If I continue that for a year, I'll have $625 per month extra that I'd be used to paying. I could start applying that extra to the house at that time.
So should I refinance?
@Buffalo,
Buffalo wrote:
So should I refinance?
Sounds like a sound thing to do. You'll have more choice, with the extra $'s each month, and you'd be rid of the 6% interest. You seem to be a smart, solid citizen. You're better off than most today.
If you plan to stay there, do everything possible to pay off the home ASAP.
Then remodel to make it handicapped accessible.
@Buffalo,
First, shop that loan around. $1600 + 2% sounds too high although that depends on your finances. Next, consider the payback time. You are looking at paying $1600 + 2 x $1300 = $4200. A good payback is 2 years. If you are saving $200 per month, then your payback is 21 months. Check! Refinance. Finally, you should be able to pay off your loan faster if you put those savings back into the loan because you are paying less interest. I calculate around 18 1/2 years instead of 20.
You should definitely use the savings to pay off your car note first. Your car is likely at a higher interest rate and the interest is not tax deductable.
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