i just did all the math comparing refi to making extra payments.
26 yrs left on a 30yr @ 6%
20 yr @ 5.25 = savings of 125k refi vs 112k savings extra payments
20 yr @ 5% = savings of 137k refi vs 84k savings extra payments
20 yr @ 4.75 = savings of 149 refi vs 56k savings extra payments
20 yr @ 4.5 = savings of 162 refi vs < 10k savings extra payments
I'm holding out for 4.75 or less
26 yrs left on a 30yr @ 6%
20 yr @ 5.25 = savings of 125k refi vs 112k savings extra payments
20 yr @ 5% = savings of 137k refi vs 84k savings extra payments
20 yr @ 4.75 = savings of 149 refi vs 56k savings extra payments
20 yr @ 4.5 = savings of 162 refi vs < 10k savings extra payments
I'm holding out for 4.75 or less
What are you doing? Making extra payments? Not sure your rationale. With a lower interest rate two things happen.....one your payment is lower....two more of each payment goes to pay off the principal faster.
Don't rush paying off your mortgage....instead increase your investments....if your interest rate is 5% for example but you are able to over time get a better return than 5% you will be ahead.
One other thing...there is some unusual things going on in the market. Typically a 15 year loan is considered a lower risk loan because the principal is paid off faster.....thus it gets a lower interest rate. Not in todays world....today the 15 year is running a higher interest rate...so whatever you do don't lock into a 15 year. The reason is the government is trying to drive the mortgage rates down to spur the housing economy....they are buy 30 year mortgage backed securites and not 15 year mortgage backed securites.
While I am at it....here is another weird thing. I priced a ploan today...715 credit score....with 10% as a down payment the interest rate was 5.0%......I priced the same loan with the same investor with the client putting 20% down. Now you would think from a logic standpoint that a loan where the consumer puts 20% down would be lower risk and in turn result in a better interest rate......wrong the interest rate on a 30 year fixed was 5.625%.
One other indication where interest rates may be headed. In the past you could raise the interest rate and get the investor to pay closing costs. So you could walk into closing with a $200k mortgage and walk out of cloising with a $200k mortgage. Instead of getting say 5%....you would get 5.5% and the investor pays all of the costs. There is a danger to this for investors....if six months from now rates drop and you refinance again they paid all of the closing costs...lets say $4,000 and didn't get a chance to recoup their money through the higher rate. The current pricing totally discourages even considering this option. This leads me to believe the investors fear that lower rates will be coming and they are trying to avoid losses.
While I am at it....here is another weird thing. I priced a ploan today...715 credit score....with 10% as a down payment the interest rate was 5.0%......I priced the same loan with the same investor with the client putting 20% down. Now you would think from a logic standpoint that a loan where the consumer puts 20% down would be lower risk and in turn result in a better interest rate......wrong the interest rate on a 30 year fixed was 5.625%.
One other indication where interest rates may be headed. In the past you could raise the interest rate and get the investor to pay closing costs. So you could walk into closing with a $200k mortgage and walk out of cloising with a $200k mortgage. Instead of getting say 5%....you would get 5.5% and the investor pays all of the costs. There is a danger to this for investors....if six months from now rates drop and you refinance again they paid all of the closing costs...lets say $4,000 and didn't get a chance to recoup their money through the higher rate. The current pricing totally discourages even considering this option. This leads me to believe the investors fear that lower rates will be coming and they are trying to avoid losses.
Hell yes. We are on this. I am looking at this riight now.
Northern Star..... Yes you are correct. I told the guy I just want to knock years off and pay about the same payment. He said thats not a good plan at this time. So it looks like it might be a 30yr. I would save about 300 a month
ope:
Northern Star..... Yes you are correct. I told the guy I just want to knock years off and pay about the same payment. He said thats not a good plan at this time. So it looks like it might be a 30yr. I would save about 300 a month
ope:
Just curious what 6 months mortgage rates are and 1 year rates in your town ?
If you got a got a good paying steady job and your wife is working. You better off to go into these short term mortgages . Then if you have some extra cash to put against the principle at end of term . Clunk it down. Kill your mortgage as fast you can and put hold on any major signifcant investment plan til your house is paid. Don,t worry the rates wont jump off the board in a 5 years .
Long term mortgages are only good for your bank,s pocket.
If you got a got a good paying steady job and your wife is working. You better off to go into these short term mortgages . Then if you have some extra cash to put against the principle at end of term . Clunk it down. Kill your mortgage as fast you can and put hold on any major signifcant investment plan til your house is paid. Don,t worry the rates wont jump off the board in a 5 years .
Long term mortgages are only good for your bank,s pocket.
Good point, I ran into this myself. Got quoted 4.875% + .75 pts last week for 15 yrs, 5.125% for 30 years.
THIS week, after the major Fed move, and the 10 and 30 bond yields dropping 50bp, was quoted the exact same rate on the 15, but the 30 has dropped to 4.875 + .50 pts.
I was like, wtf ?? Same rate, haven't you idiots seen the 10 yr bond yield drop like crazy this week? It's insane that it is cheaper to go 30 years - mostly due to speculation that the Fed is going to buy up a ton of 30 yr Fannie debt, pushing the yields down even more.
Will wait a few more days before locking, but definitely better to go 30 at this point, the historical 15 yr benefit is gone!
Have you sit down to figure out how much interest you,ll be giving the bank for a 30 year mortgage. At least double the price of the house and more close to 2.5 times. Why give them all that interest ?
How many families have pay into 20 ,25, 30 year mortgages and invested too. How are those investments looking now ? That cash should of been down on the mortgage.
If you and your wife both got steady secure jobs , the best for any family is kill the mortgage as soon as possible !!!
Bank Managers are like touts, their job is to make money for the banks and at the same time try to make the customer feel secure.
Bottom line their hosing you.
You are making a fatal flaw here. Yes, of course you are paying a fortune in interest over the 30 years. But, the concept that D2 is mentioning is that, in an environment with inflation (which WILL happen in the next decade due to all this debt and money being printed), you can INVEST the difference between what you are paying on the 30 year vs. what you would be paying on the 15 year, and make A HIGHER RETURN THAN YOUR MORTGAGE RATE.
For example: on 350k, the monthly difference between a 30 year fixed and 15 year fixed at same rate (and yes, they are the same right now, even though they haven't ever been historically - this could change in weeks, of course) is 900$/mo.
Basically, if you can take that 900$ and INVEST it elsewhere to get better than 5% return (granted hard right now in this deflationary environment, but will be very possible when rates go back up), YOU ARE BETTER OFF INVESTING the extra 900$/mo, as opposed to paying a 15 yr mortgage with it.
So, yes, on a 30 year loan you are paying insane interest over the 30 years, BUT IF you can invest the additional money saved with a 30 year loan rather than a 15 year loan, and produce a better return than the mortgage rate (~5%), you are actually MAKING money on the deal, regardless of the high amount of total interest you are 'paying' over 30 years.
Of course add to the above that mortgage interest is tax deductable, so the rate you need to earn on your investment outside the mortgage is even less.
Basically they are giving you money for 30 years at 5%, and the govt is paying part of it. Why not take it instead of paying more monthly - actually 'investing' in this 5% rate for the next 15 years.
I'd rather take the govt. subsidized 30 year loan at < 5%, and put the 900$/mo to work elsewhere.
Basically they are giving you money for 30 years at 5%, and the govt is paying part of it. Why not take it instead of paying more monthly - actually 'investing' in this 5% rate for the next 15 years.
I'd rather take the govt. subsidized 30 year loan at < 5%, and put the 900$/mo to work elsewhere.
Hey Cusipz
First of all, if your into 350k mortgage , your way over your head. If your in a 20 ,25, 30 mortgage now. You have should of found out , how much interest will you be paying before you pay principle off. In your example 350 k, at least another 500 k interest before the mortgage is done. Will your investments make 500k plus until your mortgage is up? You won,t make up in any Gic or long term bonds. Mutual funds have plunged now, people are seeing 10 years gains wipe out in the last 4 months. Bankers want you to invest and hold mortgage too cuz they make more money of your money when your investing with your money and getting a higher rate. They make money both ways on you. When you retire and draw from a mutual rrsp contribution , you will be taxed according on how much income your making at the time.
The best way to have more money when you retire is kill the mortgage immediately. If you can pay your mortgage in 10 years instead of 20 years, you,will be better off. Then after 10 years invest in your future. Your mortgage payment that you had for that extra ten years can go in future investments.
The advantages of paying your mortgage quickly will be you will have better credit and equity earlier in life. Your able to have free money to either invest,buy, or remodel your home.
From what I see 5 year mortgage term at 5.75 is the way to go providing you and your wife can handle heavier payments weekly,not monthly.Also, providing you both have secure jobs and can handle a heavier payment.
Crunch the numbers down with your banker or go to a bank site and try out those mortgage calculators out. You,ll be surprized at how much money you will save if you can pay your mortgage off tens years earlier even at 1% percent higher mortgage.
Don,t be worried about the feds raising the mortgage rates now or even in the near future. The banks ate too many mortgages recently, they don,t want to eat any more. There are too many families who are just getting by as it is now. Increase in mortgage rate would only bankrupt more families.
Bankers are like touts, they work to make earnings for the banks .
Don,t be fooled.
First of all, if your into 350k mortgage , your way over your head. If your in a 20 ,25, 30 mortgage now. You have should of found out , how much interest will you be paying before you pay principle off. In your example 350 k, at least another 500 k interest before the mortgage is done. Will your investments make 500k plus until your mortgage is up? You won,t make up in any Gic or long term bonds. Mutual funds have plunged now, people are seeing 10 years gains wipe out in the last 4 months. Bankers want you to invest and hold mortgage too cuz they make more money of your money when your investing with your money and getting a higher rate. They make money both ways on you. When you retire and draw from a mutual rrsp contribution , you will be taxed according on how much income your making at the time.
The best way to have more money when you retire is kill the mortgage immediately. If you can pay your mortgage in 10 years instead of 20 years, you,will be better off. Then after 10 years invest in your future. Your mortgage payment that you had for that extra ten years can go in future investments.
The advantages of paying your mortgage quickly will be you will have better credit and equity earlier in life. Your able to have free money to either invest,buy, or remodel your home.
From what I see 5 year mortgage term at 5.75 is the way to go providing you and your wife can handle heavier payments weekly,not monthly.Also, providing you both have secure jobs and can handle a heavier payment.
Crunch the numbers down with your banker or go to a bank site and try out those mortgage calculators out. You,ll be surprized at how much money you will save if you can pay your mortgage off tens years earlier even at 1% percent higher mortgage.
Don,t be worried about the feds raising the mortgage rates now or even in the near future. The banks ate too many mortgages recently, they don,t want to eat any more. There are too many families who are just getting by as it is now. Increase in mortgage rate would only bankrupt more families.
Bankers are like touts, they work to make earnings for the banks .
Don,t be fooled.
Hawk:
hate to tell you but you don't get it. Cuspiz did a great job explaining it.
There are acouple of flaws with your plan...one is you think you are going to get your house paid off fast. If you locked in a 30 year today a 5% on some amount lets just say $200k for an example there is no way the average gjoe is going to have it paid off before inflation hits and the rates go up.
For arguement sake lets say his payment is $1000 a month. So now lets just for arguement sake sake someone pays extra $600 a month to pay that 30 year mortgage off in 15 years. Now for the next 15 years he invests $1600 a month. That is person "doesn't get it".
Now the person who gets it pays $1000 a month for 30 years. He invest $600 a month for 30 years. We will call him "Rich Wise Person"
At the end of 30 years each ahs a house paid off and a pile of cash. The difference is "Rich Wise Person" has a bigger pile of cash than "Doesn' Get It".....assuming over the course of 30 years his return on hi investment is greater than 5%. I think it will be greater than 5%...using history as my guide. Oh and I didn't even take into account the mortgage interest deduction which is another huge benefit to carrying debt based on the current tax laws. Basically a government subsidy.
