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Mortgage/Refinancing question
Posted on 4/14/10 at 9:02 am
Posted on 4/14/10 at 9:02 am
This guy I know was talking about refinancing his mortgage the other day. Currently, he has a 30 year mortgage (which, I believe, is fixed rate and he is in year 3) but he said that once he refinances he will pay it off in 12 years. The only thing that even remotely makes this possible to me is paying the same mortgage note twice a month instead of once. But I'm fairly ignorant in this field so I don't know what the options are. Am I right with my assumption and is this beneficial? I didn't really want to ask him any questions for fear of sparking further conversation.
3
Posted on 4/14/10 at 10:24 am to Ole Miss Sucks
Its possible if he had a very high interest rate to begin with.
Posted on 4/14/10 at 10:53 am to Ole Miss Sucks
quote:
but he said that once he refinances he will pay it off in 12 years.
You can pay off a 15 year in 12 years 8 months when you pay every other week......
I had one before.....
Posted on 4/14/10 at 12:48 pm to LSUDad
I have a 30 year loan that I pay one extra monthly payment per year and I will pay off the loan in 22 years and 7 months (7 years and 5 months early).
Posted on 4/14/10 at 11:01 pm to Ole Miss Sucks
With rates as low as they are, why pay it off early?
Posted on 4/14/10 at 11:07 pm to foshizzle
quote:
With rates as low as they are, why pay it off early?
It amazes me how many differing opinions people give on this subject. You are getting back 3-5% by paying it off early. Whats not to like about that? Better than any savings or most cds.
Posted on 4/15/10 at 7:32 am to C
Work the positive spread...current interest rates less tax deductions are what, 2-4%? If one cannot earn greater than 2-4% over the next 30-years by investing it, God help us all.
Take the difference in house note between the 15 and 30 yr term and invest it. I don't have a crystal ball, but I am betting a 9% return is feasible over 30-yrs. That is 9 - 4% = 5% net return.
Of course, piece of mind for owning your home sooner is important for some people. However, the way I look at it, piece of mind costs me 5%. Do the math. That ain't Burger King cost. That is Ferrari cost.
Take the difference in house note between the 15 and 30 yr term and invest it. I don't have a crystal ball, but I am betting a 9% return is feasible over 30-yrs. That is 9 - 4% = 5% net return.
Of course, piece of mind for owning your home sooner is important for some people. However, the way I look at it, piece of mind costs me 5%. Do the math. That ain't Burger King cost. That is Ferrari cost.
Posted on 4/15/10 at 7:45 am to C
quote:
You are getting back 3-5% by paying it off early. Whats not to like about that? Better than any savings or most cds.
A CD is not the right comparison. A mortgage is (in this case anyway) a 30 year investment. You should therefore compare with a 30 year investment in a diversified portfolio in a tax-advantaged account.
You don't compare with a 1 year CD unless you are borrowing at 1 year terms.
Posted on 4/15/10 at 7:48 am to foshizzle
When I got my first mortgage I was faced with the choice of prepaying the note or investing in the company stock. The company matched me dollar for dollar up to a certain amount, the obviously correct decision was to not pay the mortgage and get the instant 100% ROI in the stock.
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