Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I currently have property at low rates for 15 years. Unfortunately it didn't make financial sense for me to refinance, since I wasn't able to get out of paying closing costs. In the case of these, I would be better off pre-paying.
The only property I have at 30 years is unfortunately a multi-unit. Although the value is high, the interest rate and balance are just low enough to make it not worth it to refinance. Unfortunately for investment property the banks tack on extra points to increase the interest rate.
Honestly, I wish I hadn't gotten a 30 year mortgage in the first place. The extra payments do not seem to have made much of a difference.
the problem is that when you refinance if you just tack on another 30 years interest the cost of the property goes up alot. then you get involved with opportunity cost on the money saved .
you would have to invest and not spend the money saved in order to not spend so much more in interest otherwise you just have to keep paying the same amount you were and retire the mortgage sooner.
aaaahhh your missing a point madman . the 3.5% is if your taking a new mortgage today or what your refinancing to. but if your in the 5-6 % range before the refinance then thats where you already are.
at 6% you spent 21 years paying down the loan to just 1/2 , interest is finally less than principal in each payment 19 years later .
at 5% you will pay down 1/2 the blance in 20 years and have more in principal being paid then interest at 16 years.
imagine paying your morgage for 20 years at 6% , and now starting from scratch at 3.5% adding 30 more years of payments . what did that house end up costing you after 50 years of interest?
This is all completely irrelevant. (Not to mention borderline ridiculous because the vast majority of people refinancing aren't doing so after having the same mortgage for 18-21 years.)
I thought I disabused you years ago of your perception that banks front-load interest on mortgages. You pay interest on a monthly basis for the money you borrow. If you owe $200,000, you're going to pay $583 in interest that first month of your mortgage regardless of whether it is a 30 yr or 15 yr. mortgage. Then, depending upon how much principal you pay in, your interest payment is recalculated and you pay 3.5% the following month on the outstanding balance. If you want to pay if off quickly, be it 15 or even 10 years, feel free to do so. But there is no "penalty" for extending it out 30 or even 40 more years. Or just pay interest-only for months and years on end indefinitely. There are financial planners who recommend taking the longest mortgage possible - especially at these interest rates - and then paying the principal back years later in cheaper dollars.
But let's get back to your erroneous conclusion that the "pointer" gets set back almost to zero when you refinance. As I've already demonstrated in my earlier post, that simply is not true.
When i say the pointer gets set back to zero im talking time wise.
While the mortgage holds the same rate all the way through its front loaded in the sense that in the early years the way the principal is amortized you pay mostly interest because the balance is bigger on the loan.
At 5 or 6% 83% or so of your early payments are interest only... By the end 83% is principal..
In any case refinancing and extending the loan out another 30 years negates all the interest you paid to date and you start at 30 years to go again .
You may start at a lower balance but with 30 years to go you better crunch the numbers and look at your total cost for the house including all the previous interest..
There is nothing here to dispute, thats just the way it works. more interest and more time can =paying higher costs for the house,
the answer is keep making the same payment as the old mortgage and get rid of it faster. then the refinance costs you less.
When i say the pointer gets set back to zero im talking time wise.
No, that is not what you said:
Quote:
Originally Posted by mathjak107
can you imagine finally getting there and setting the pointer not only back to almost all interest but adding another 30 years of payments to boot.
Under no circumstances whatsoever will the mortgage payment be back to almost all interest at these interest rates.
Just admit that you were wrong.
Quote:
Originally Posted by mathjak107
While the mortgage holds the same rate all the way through its front loaded in the sense that in the early years the way the principal is amortized you pay mostly interest because the balance is bigger on the loan.
Sorry, no. There is no special way for the principal to be amortized. There is no difference between how a mortgage is amortized or how any other loan is amortized.
Quote:
Originally Posted by mathjak107
In any case refinancing and extending the loan out another 30 years negates all the interest you paid to date and you start at 30 years to go again .
You may start at a lower balance but with 30 years to go you better crunch the numbers and look at your total cost for the house including all the previous interest..
There is nothing here to dispute, thats just the way it works. more interest and more time can =paying higher costs for the house,
the answer is keep making the same payment as the old mortgage and get rid of it faster. then the refinance costs you less.
It doesn't negate anything. Again, you're making no sense. Let me try another example to make it clearer using your hypothetical person who has had a mortgage at 6% for 21 yrs and paid down 1/2 the mortgage and call him Joe. Let's say Joe started with a $400,000 balance and now owes $200,000 and wants to refinance that remaining $200,000 balance at 3.5%. And let's say another person (Bob) has been house-hunting and just found his dream house and is now in the process of getting a new purchase mortgage of $200,000 also at 3.5%. They both need mortgages for $200k and will have the very same interest rate. For some reason, you think it is a grave financial mistake for Joe to get a $200k mortgage for 30 yrs., but it is perfectly acceptable for Bob to do so. They are both borrowing the same amount of money at the same interest rate going forward. It makes absolutely no difference what has occurred in the past.
It doesn't matter that Joe has paid down a $400k mortgage to $200k and that Bob is just starting out. They both are borrowing $200k today at the same interest rate and financing that $200k going forward. It makes absolutely no sense to say in one instance that such a loan is perfectly fine, but saying in the other instance it is a mistake.
I get 1366.00 a month for 12 years at 3% to pay off 165 k.
You would pay in 197 k . im a little confused as to the question because your mortgage has to be at a higher rate then 3%
I think what's confusing you is that the payment includes amounts for property taxes and insurance. Unfortunately, the property taxes on a second residence are higher than I imagined n this county.
Under no circumstances whatsoever will the mortgage payment be back to almost all interest at these interest rates.
Just admit that you were wrong.
Sorry, no. There is no special way for the principal to be amortized. There is no difference between how a mortgage is amortized or how any other loan is amortized.
It doesn't negate anything. Again, you're making no sense. Let me try another example to make it clearer using your hypothetical person who has had a mortgage at 6% for 21 yrs and paid down 1/2 the mortgage and call him Joe. Let's say Joe started with a $400,000 balance and now owes $200,000 and wants to refinance that remaining $200,000 balance at 3.5%. And let's say another person (Bob) has been house-hunting and just found his dream house and is now in the process of getting a new purchase mortgage of $200,000 also at 3.5%. They both need mortgages for $200k and will have the very same interest rate. For some reason, you think it is a grave financial mistake for Joe to get a $200k mortgage for 30 yrs., but it is perfectly acceptable for Bob to do so. They are both borrowing the same amount of money at the same interest rate going forward. It makes absolutely no difference what has occurred in the past.
It doesn't matter that Joe has paid down a $400k mortgage to $200k and that Bob is just starting out. They both are borrowing $200k today at the same interest rate and financing that $200k going forward. It makes absolutely no sense to say in one instance that such a loan is perfectly fine, but saying in the other instance it is a mistake.
it makes lots of sense. but your example doesnt because your comparing a 200k mortgage with a 400k mortgage.
joe has paid 21 years of interest at 6% which is part of his home cost , he refinanced and just added 30 more years of interest at 3.5% to his cost basis less any tax rebate.
heres the numbers
400k mortgage no refinance and just pay origonal mortgage. total cost when house is paid is 863,352.76 before any tax rebates on the interest.
interest paid 463,352.00
after tax cost of house assuming 25% bracket 747,514.00
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
400k mortgage paid 6% for 21 years and 3.5% for 30 years . total house cost 919,559.00 before tax rebates on interest.
interest paid 519,559
after tax cost of house assuming 25% bracket 789,669.00
joe would pay 42,155.00 more for his home refinancing.
of course one could argue joe could invest the savings after his refinance each month and offset the interest but joe could just as easily find other uses for the money so we will leave that part out.
the above is the danger of refinancing a 30 year into another 30 year and going full term. a 30 year into a 15 year works great
Last edited by mathjak107; 09-17-2012 at 07:40 AM..
I am with madMan, there is no difference between Joe and Bob going forward and paying off 200K loan with new loan or refinance.
What Joe already paid is irrelavant with regards to the cost of the loan going foreward. Whether that is a good financial decision or not (borrowing at 3.5% vs. other high credit consumer loan over 30 years) is another question and that where mathjak wants to make a point at the begining and end up defending something that is not defensible--there is no difference going forward. But it seems the goal post keep moving (the question keep shifting) .
There sure is a difference ,did you look at the ultimate cost of the house.
which amount would you rather have paid for your 400k house once its paid off? 747,514.00 or 789,600.00?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
.
