Posted on: 05th Jul, 2010 07:15 am
i have 15 year mortgage with 5.25% interest. current loan balance is $198k. house is worth about 260k in the current market. our monthly payment is about $1750/month. i have some money (about 60k) savings that make no produce any interests. i am planing to put that money into the house to reduce the principle i own on this loan to 140k. i can refinance $140k at 4.125% for 15 years. should i pay down the principle on my cuurent loan using that 60k (without paying closing costs) or should i refinace the loan with lower rate?
if i pay down the principle, most of our current monthly mortgage payment goes to paying remaining principle or will the principle and interest payments stay the same since we paying same loan?
if i pay down the principle, most of our current monthly mortgage payment goes to paying remaining principle or will the principle and interest payments stay the same since we paying same loan?
Assuming you got your current 15-year fixed 12 months ago, Refinancing $140k at the 4.125% interest rate would save you $80/mo over paying the mortgage down to $140k and keeping the 5.25% interest rate. The break even point (closing costs divided by monthly savings) is probably going to be around 24 months, so if you plan on having this mortgage until it's paid off you'd save around $11,000 in payments over the remaining life of the loan if you refinanced.
If you just pay the principal down then you will have jumped ahead in the amortization schedule and a significantly greater portion of each payment would be applied to principal - paying your mortgage off much quicker than the 15-years it was for.
If you just pay the principal down then you will have jumped ahead in the amortization schedule and a significantly greater portion of each payment would be applied to principal - paying your mortgage off much quicker than the 15-years it was for.