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Post by Bittu Thu Oct 06, 2011 8:00 pm

k so I have a mortgage at 4.25%, 15 yr term. I'm 2 yrs in. Original loan amount was 400k, now the principal is 355k.

1) one mortgage agent is offering me 3.375% no points no cost, 15 yrs.

2) another agent is offering me 3.2% APR, 10 yr term, 8k closing cost.

I don't think either option is good enough to move on. What do you think?

TIA


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Post by Guest Thu Oct 06, 2011 8:28 pm

what's wrong with option 2?

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Post by Bittu Thu Oct 06, 2011 8:34 pm

I'd like somebody to run the numbers and tell me how I look with each options.

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Post by Guest Thu Oct 06, 2011 9:26 pm

Option 1: Total interest $ 97,897.55, $ 2516 monthly payment. Will be done in oct 2026.

Option 2: Total interest $ 60,293.29 +8000=68,293.29, monthly payment $ 3460.78. Will be done by oct 2021.

Option 3: Include the closing costs in the principal. So Principal is $ 363,000. Total interest for that:61,652.01+8000. Monthly payment:3,538.77.

Option 4: Take option 1, but pay option 2's monthly payment (so you're paying $ 884.78 extra every month). Total interest: $ 65847.69. Will be done by Feb 2022

I am no math/IIT person. I took the help from here:

http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

If I were you, I'd choose option 4, but you got to be disciplined to pay the extra payments every month.

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Post by Guest Thu Oct 06, 2011 9:53 pm

Option5: Add the 8000 to the principal (347,000), take option 1, pay option 2 mortgage. Total interest : $ 63,884.04. Will be done by jan, 2022.

I guess we need to think abt refinancing too. We are currently paying 3.875 on 15 yr.

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Post by Kris Thu Oct 06, 2011 10:45 pm

Bittu wrote:k so I have a mortgage at 4.25%, 15 yr term. I'm 2 yrs in. Original loan amount was 400k, now the principal is 355k.

1) one mortgage agent is offering me 3.375% no points no cost, 15 yrs.

2) another agent is offering me 3.2% APR, 10 yr term, 8k closing cost.

I don't think either option is good enough to move on. What do you think?

TIA


>>> Without running the numbers, what's the downside to #1? Your payments will be lower. Alternatively, you may choose to do an additional principal pay down each month and pay the loan off earlier.

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Post by The Absolute Zero Fri Oct 07, 2011 8:44 am

Bittu wrote:k so I have a mortgage at 4.25%, 15 yr term. I'm 2 yrs in. Original loan amount was 400k, now the principal is 355k.

1) one mortgage agent is offering me 3.375% no points no cost, 15 yrs.

2) another agent is offering me 3.2% APR, 10 yr term, 8k closing cost.

I don't think either option is good enough to move on. What do you think?

TIA


Bittuboy,
Wanna live in peace without bother and reckless abondon? Your term now is 13 years without refi. You do not know how long you will live. Assume you will be waukay till 80 for now (you may want to read my first sentence again).

The refi does not make a great diff to your payments (after reading Kinnera's options) except for a few hundred. Spend those few hundred on Roth IRA or 529 for beta/i. Or better yet buy a camera or take a Hawaii vacation or even go Machupichu. You do not go Machupichu everyday. The advantage of paying higher mortgage is that you get a larger tax break.

Period. For further information read my signature below. :-)

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Post by Bittu Fri Oct 07, 2011 12:25 pm

Thanks everyone, for your comments. Thanks Kinnu for all those options xoxo

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Post by Guest Fri Oct 07, 2011 12:29 pm

The Absolute Zero wrote:
Bittu wrote:k so I have a mortgage at 4.25%, 15 yr term. I'm 2 yrs in. Original loan amount was 400k, now the principal is 355k.

1) one mortgage agent is offering me 3.375% no points no cost, 15 yrs.

2) another agent is offering me 3.2% APR, 10 yr term, 8k closing cost.

I don't think either option is good enough to move on. What do you think?

TIA


Bittuboy,
Wanna live in peace without bother and reckless abondon? Your term now is 13 years without refi. You do not know how long you will live. Assume you will be waukay till 80 for now (you may want to read my first sentence again).

The refi does not make a great diff to your payments (after reading Kinnera's options) except for a few hundred. Spend those few hundred on Roth IRA or 529 for beta/i. Or better yet buy a camera or take a Hawaii vacation or even go Machupichu. You do not go Machupichu everyday. The advantage of paying higher mortgage is that you get a larger tax break.

Period. For further information read my signature below. :-)



AZ,

If he took option 1 (15 yr @ 3.375 for 355k), but paid the same monthly payments as he's doing now (around $3009), i.e $493 extra, he'll be done by oct 2023 and will be saving $ 28,463 in interest. He does that without spending a single dollar from his pkt for refinancing. Not a bad deal, eh?

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Post by The Absolute Zero Fri Oct 07, 2011 2:02 pm

kinnera wrote: AZ,

If he took option 1 (15 yr @ 3.375 for 355k), but paid the same monthly payments as he's doing now (around $3009), i.e $493 extra, he'll be done by oct 2023 and will be saving $ 28,463 in interest. He does that without spending a single dollar from his pkt for refinancing. Not a bad deal, eh?

Assuming he lives up to 2023 :-) I said that part in my post. Read it again please.

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Post by Guest Fri Oct 07, 2011 2:56 pm

The Absolute Zero wrote:
kinnera wrote: AZ,

If he took option 1 (15 yr @ 3.375 for 355k), but paid the same monthly payments as he's doing now (around $3009), i.e $493 extra, he'll be done by oct 2023 and will be saving $ 28,463 in interest. He does that without spending a single dollar from his pkt for refinancing. Not a bad deal, eh?

Assuming he lives up to 2023 :-) I said that part in my post. Read it again please.

AZ, if that is the thinking process, then why even bother buying a house, invest in Roth IRAs, 529s, etc?

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Post by The Absolute Zero Fri Oct 07, 2011 3:38 pm

kinnera wrote:AZ, if that is the thinking process, then why even bother buying a house, invest in Roth IRAs, 529s, etc?

For the family. 529 won't work for HIM. Roth IRA has a beneficiary designated. So his family will do well. :-) My philosophy in life is, I can go to dogs or do anything but none else should suffer when I die.

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Post by Jeremiah Mburuburu Sat Oct 08, 2011 12:42 am

Bittu wrote:k so I have a mortgage at 4.25%, 15 yr term. I'm 2 yrs in. Original loan amount was 400k, now the principal is 355k.

1) one mortgage agent is offering me 3.375% no points no cost, 15 yrs.

2) another agent is offering me 3.2% APR, 10 yr term, 8k closing cost.

I don't think either option is good enough to move on. What do you think?

TIA

compared to your current loan,

1) option 1 gives you a $19,630 reduction in the present value (pv) of the total cost;

2) option 2 gives you a $16,107 reduction in the pv of the total cost.

the net effects are as if you, at present, had an additional $19,630 (or $16,107) to invest at 3.2%. if the closing cost of option 2 were $4,500 rather than $8,000, options 1 and 2 would be about equally attractive. if you can afford the additional monthly payment, option 2 could be better than option 1 because it would pay off your loan 5 years earlier.

note: i took the cost of capital to be 3.2%, and discounted the monthly cash flows ($3,008.73, $2,545.79, $3,503.56 respectively for "no change," option 1, and option 2) at that rate to arrive at their total pv (not shown) over the (remaining) life of the loan in each of the three cases.

get someone to check these numbers and conclusions.

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