Posted on: 14th Jun, 2011 12:15 pm
I have a mortgage that I owe 117,000 at 5.25 %.
I am planning to pay it off in the next 4 years.
Is it worth refinancing to maybe a 3 year arm or something very cheap?
I am planning to pay it off in the next 4 years.
Is it worth refinancing to maybe a 3 year arm or something very cheap?
if you would have enough funds to pay off the mortgage within a few years, then you could take an arm. problem lies if you needed to sell the property to get the loan paid off. if thats the case, you might find that property values could decline and you could get stuck in the arm. but if you can pay off the loan with your own funds, then an arm would make sense, if you can save enough money. say by refinancing, you save 200 a month, but it cost you 3k to close the new refinance. it would take you 15 months to recover the closing costs. do the break even math, if you dont save any money by the 3rd year, it would not benefit you. like wise if you recover your closing costs within a few months, you would save lots of money by 4 years. rates for 5/1 arms are in the 3% range fyi
If you have plans to retire the loan that quickly, I can't see any reason for you to refinance, frankly. With a balance that low and the accelerated payments you're making, you wouldn't likely recoup whatever costs you would be paying in the refinance, and even if you did so, they'd be minimal.
I don't see much of a benefit for you to go through a refinance.
I don't see much of a benefit for you to go through a refinance.
If you have a $117,000 mortgage at 5.25% and you pay it off in 48 months, you must pay $2,707 monthly and 48 month total payments are $129,969
If you do the same with and ARM at 3.000% (not sure you can get that rate) you must pay $2,589 monthly for 48 months and the total paid would be $124,306
You would save maybe $5,663 in payments over 48 months. Subtract from that the costs you will pay to refinance.
I think it makes very little sense to refinance. The $ you save is not worth the effort.
If you do the same with and ARM at 3.000% (not sure you can get that rate) you must pay $2,589 monthly for 48 months and the total paid would be $124,306
You would save maybe $5,663 in payments over 48 months. Subtract from that the costs you will pay to refinance.
I think it makes very little sense to refinance. The $ you save is not worth the effort.
PS:
You would need to pay off in three years, not four.
If your ARM rate increased in the fourth year, you would lose the 5 cents you might have saved.
You would need to pay off in three years, not four.
If your ARM rate increased in the fourth year, you would lose the 5 cents you might have saved.
C'mon, John...you know how precious 5 cents is these days, don't you? My son's piggy bank would be a lot lighter if it weren't for all those nickels and clumps of five pennies!
George, your son's piggy bank would really be lighter if he had a three year ARM that has a start rate below the margin and he planned on paying it off in four years