Posted on: 29th Mar, 2010 12:42 pm
i have a 15 year loan for $218,500 at 5%, two years old. current balance is about $199,000. i also have about $50k in cash in bank. should i refinance at 10 years, 4% interest, putting about $50k against the loan (making the new loan $150,000) or pay the existing mortgage down by $50k?
Hi kmann,
How long are you planning to stay in the property? If you want to stay in the property for 7-8 years, then it would be a good option to refinance the loan. This will in turn help you in offsetting your closing costs. However, you should refinance the loan if you're able to get an interest rate which is lower by 2% of your present rate.
Take care.
How long are you planning to stay in the property? If you want to stay in the property for 7-8 years, then it would be a good option to refinance the loan. This will in turn help you in offsetting your closing costs. However, you should refinance the loan if you're able to get an interest rate which is lower by 2% of your present rate.
Take care.
I plan on being in the house for many years. Since the interest rate is only a 1% decline, its a tough decision. I guess it all hinges on if I can get closing costs very low. Thanks for the response.
Does the home need any improvements, like a new kitchen or exterior upgrades?
If you pay down the existing loan by $50,000, the balance will be 149,000 and your required monthly payment will still be $1,727.88. That will then pay off in 106 months and for the remaining 106 months you will have paid $183,155.
If you do a new ten year loan at $154,000 at 4% (I just threw in $5,000 for closing costs and prepaids) the monthly payment will be $1,559.18 and over 120 months you will have paid $187,101. BY refinancing and paying the minimum payment your monthly payment drops by $168 but the term is 14 months longer and you pay almost $4,000 more.
To compare apples to apples, if you refinance to 4% and you want to pay off in 106 months, same as you would with current loan if you pay down $50,000, you would voluntarily pay monthly $1,726.98 which is almost same as you pay now.
Do not refinance. Also, I would not give the bank my $50,000 now. I would continue to save and when it got to a point years down the road, you can then pay off in full if you want. If you give the bank your money now, you have to refinance to get it back.
If you do a new ten year loan at $154,000 at 4% (I just threw in $5,000 for closing costs and prepaids) the monthly payment will be $1,559.18 and over 120 months you will have paid $187,101. BY refinancing and paying the minimum payment your monthly payment drops by $168 but the term is 14 months longer and you pay almost $4,000 more.
To compare apples to apples, if you refinance to 4% and you want to pay off in 106 months, same as you would with current loan if you pay down $50,000, you would voluntarily pay monthly $1,726.98 which is almost same as you pay now.
Do not refinance. Also, I would not give the bank my $50,000 now. I would continue to save and when it got to a point years down the road, you can then pay off in full if you want. If you give the bank your money now, you have to refinance to get it back.
