Home refinance advice

[mattkime]

>>It's a bit of a waste to make extra payments on an existing mortgage because those extra payments get applied to the BACK END of the mortgage where the amortized interest payments are minimal.

so you're saying that the extra payments don't decrease the interest you'll be paying?

[thermarest]

dotman wrote:
but i HATE debt.

.dot

If you hate debt and eliminating that hate is your objective, the near-4% 15-yr rates are good. Are you a Costco Member? They have a mortgage program the appears to have very good rates and limits closing fees.

That said, my take is don't do a 15-year. A 30-year fixed is the cheapest money you'll ever get. Unless you have NOTHING in the next couple decades that you think you may want to spend a significant sum on. Car, college for the kids, refinance, big vacation, 2nd home.

[3d]

mattkime wrote:
>>It's a bit of a waste to make extra payments on an existing mortgage because those extra payments get applied to the BACK END of the mortgage where the amortized interest payments are minimal.

so you're saying that the extra payments don't decrease the interest you'll be paying?

Are you familiar with mortgage amortization charts/schedules? It's easier to visualize it rather than explain it in words. Any extra payments to an existing mortgage are applied to the back end of the mortgage where your $1500 (or whatever) monthly payment is mostly principle. Very little interest. That last $1500 mortgage payment in year 29 is something like $1497 principle and $3 interest. The next extra $1500 payment to an existing mortgage is again applied to the back end where it's something like $1490 principle and $10 interest. So now these two extra payments you just made of $3000 total just saved you $13 in interest. Kinda sucks. Don't it? It's a different story if you are extremely aggressive in making extra payments. BUT THEN,,, if you find yourself with so much money you are making aggressive extra payments month after month, you most likely have the wrong type of mortgage! You should've gone with a 15 year instead of a 30.

[dotman]

my brother just emailed me and said he got a good rate through quicken. anyone ever deal with them for refinance?

he also recommended Citizens Bank. Not sure we have that around here.

we also don't have costco around here (small town). But I suppose I could buy a membership online if the rates were that good. Or do you have to have a local outfit.

.dot

[clay]

mattkime wrote:
>>It's a bit of a waste to make extra payments on an existing mortgage because those extra payments get applied to the BACK END of the mortgage where the amortized interest payments are minimal.

so you're saying that the extra payments don't decrease the interest you'll be paying?

that's usually the default way extra payments get applied. With my previous lender, I could make extra PRINCIPAL payments simply by filling in the amount in the "extra principal" field of my payment stub. With my current lender, I can still make extra principal payments in much the same way.

It's definitely something you want to be sure is getting applied in the correct way (to principal, not interest).

[abevilac]

mattkime wrote:
>>It's a bit of a waste to make extra payments on an existing mortgage because those extra payments get applied to the BACK END of the mortgage where the amortized interest payments are minimal.

so you're saying that the extra payments don't decrease the interest you'll be paying?

I have the same question as Mattkime -- I thought that extra payments decrease the amount of interest you end up paying. Do they?????

thanks for the explanations -- see above..

[Felix]

3d wrote: It's a bit of a waste to make extra payments on an existing mortgage because those extra payments get applied to the BACK END of the mortgage where the amortized interest payments are minimal.

Apparently, that depends on the mortgage you have, and who services your loan.

We have been paying extra on our mortgage. I go to the bank with a check for a principal payment, and it comes off the front end, because I ask the teller to apply the payment that way. This has saved us a fair amount of interest.

All the banks in our area have online mortgage calculators. Run some numbers there, and you should get an idea of the costs. If it seems to make sense, then go to the bank and ask for a quote. They should give you the hard numbers, including closing costs.

Last time we refinanced, we paid about $1500 in closing costs. These vary from bank to bank.

Bank Fee $450
Appraisal $395
Credit Report $20
Flood Report $15
Tax Service Fee $50
Title Insurance $550
Recording Fees $60

So the first thing to do is calculate how long it will take your savings on interest paid to cover your closing costs. If you have a $250,000 loan, and have your interest rate lowered by 1/2%, that would take about 15 months to achieve payback.

[dotman]

thanks for that explanation 3d and felix. lots to consider. well it can't help to shop around. and yes, i should have financed back in 06 for a 15. dumb dumb dumb.

.dot

[3d]

Felix wrote:
[quote=3d]It's a bit of a waste to make extra payments on an existing mortgage because those extra payments get applied to the BACK END of the mortgage where the amortized interest payments are minimal.

We have been paying extra on our mortgage. I go to the bank with a check for a principal payment, and it comes off the front end, because I ask the teller to apply the payment that way. This has saved us a fair amount of interest.
What bank handles your mortgage?

[dotman]

my mortgage was sold to usbank fwiw. i'll probably get a quote from them as well.

.dot