refinanced from 5.99% to 3.25%

[Forever_frost]

False numbers, but you'll get the idea...

15 year term at 3.5%. $1000 payment.
10 year term at 3.25%. $1200 payment.

If you took the 15 year and paid $1200 per month it would payoff in almost exactly 10 years. All you did is commit to a higher payment.

Ahh, so if I took my mortgage that is say 500 and paid 800 a month it'd be the same as refinancing at a shorter time with a lower rate but if I hit a hard time I'd still be able to fall back on the lower payment?

Why do people go for the shorter time if you can just pay more on your 30 year?

[AdamLX]

He's trying to get fancy and fucking up "imbibing".

I'm no 2x4 or 4x8 or whatever his name is.

[slow84lx]

Ahh, so if I took my mortgage that is say 500 and paid 800 a month it'd be the same as refinancing at a shorter time with a lower rate but if I hit a hard time I'd still be able to fall back on the lower payment?

Why do people go for the shorter time if you can just pay more on your 30 year?

Yes. Make sure that your overpayment is clearly marked as "additional principle".

It forces them to go ahead and make the higher payment each month and does yield the lowest interest rate usually.

[AdamLX]

Ahh, so if I took my mortgage that is say 500 and paid 800 a month it'd be the same as refinancing at a shorter time with a lower rate but if I hit a hard time I'd still be able to fall back on the lower payment?

Why do people go for the shorter time if you can just pay more on your 30 year?

That's the big question. If you can drop your rate enough then you can save money. On average you need to drop at least .5% when going from a 30 to a 15. Otherwise you can just make the 15 yr payment and payoff in the same timeframe.

[racrguy]

Ahh, so if I took my mortgage that is say 500 and paid 800 a month it'd be the same as refinancing at a shorter time with a lower rate but if I hit a hard time I'd still be able to fall back on the lower payment?

Why do people go for the shorter time if you can just pay more on your 30 year?

Interest rates are generally lower on shorter term loans, and loans are all front loaded with interest.

As far as re-amoratizing.

http://www.mortgage101.com/article/mortgage-re-amortization-explained

[Juiced4v]

Word, Mexicans don't have credit scores. Mexicans also don't have Masters degrees, this guy is really fucking with me.

lol....we pay everything casssshhhhhhh!

[SVT Lurch]

All you did is commit to a higher payment.

And hurt yourself in qualifying for the 2nd home.

Why do people go for the shorter time if you can just pay more on your 30 year?

Like he said, the rate comes into play. I had a guy refuse to refinance from a 30 year at 5.625% to a 15 year at 3.250% so he will pay an "extra" $96,000 over the life of the loan. He thinks by making the same payment that he'll get the same effect, which is not the case at all in his scenario.

[Chas_svo]

I've never seen that much difference between a 30yr and a 15yr. Most people would not catch that. 3 years ago, when we financed our house, there was about .25 or .5% difference, IIRC. With those differences, it made more sense to get the 30 and pay it like a 15 or 10 yr note. The differences are really important depending on how secure the borrower feels their job is.

My 2 cents.

[8mpg]

Interest rates are generally lower on shorter term loans, and loans are all front loaded with interest.

As far as re-amoratizing.

http://www.mortgage101.com/article/m...tion-explained

I dont think loans are front loaded... Its the fact that interest is usually calculated daily on a loan....

So day 1 you are being charged X% interest / 365 days. So you are paying that daily amount on the ENTIRE loan. Day 2 is the same daily interest rate x Day 1+day 2..

So if math were this simple... you have a $100k loan with a daily interest of .01%.... so day 1 you are charged $100,000 x 1.0001 = $100,010. Day 2 (since you havent made a payment) becomes $100,010 x 1.0001 = $100,020.01, etc... You pay much more in interest in the beginning due to the high loan value. To keep monthly payments the same, you pay very little principal in the beginning because of the large amounts of interest. Later on when the loan becomes $50k, you pay less interest therefore you same payment becomes more principal and less interest.

The first months payment will include roughly $300 in interest. Later when you have $50k balance, you will pay $150 in interest and therefore the same payment allows for more principal to be paid.

[slow99]

Oh good lord

[juiceweezl]

Yippy! I went from a 30 year 5.99% note to a 10 year 3.25% note and my payment only increased $200 bucks. Not bad.... I think. Lol...

I think it's gonna be harder to get a second home now though even though my credit score is 816. :-(

<------ Has mortgages on two homes with one as a rental. You may be able to still get one, so give it a look. We bought a new house last fall, and I just did a refi on it (12 months in to the loan). I'm looking at doing a refi on the rental too, but I'm not sure it'll be worthwhile. Just FYI, rates will not be as low for a rental as they will for your primary. The last time I looked was 4% for 20 years I think.

[SVT Lurch]

Oh good lord

You replied first, you have to explain it.

<------ Has mortgages on two homes with one as a rental. You may be able to still get one, so give it a look. We bought a new house last fall, and I just did a refi on it (12 months in to the loan). I'm looking at doing a refi on the rental too, but I'm not sure it'll be worthwhile. Just FYI, rates will not be as low for a rental as they will for your primary. The last time I looked was 4% for 20 years I think.

It's just a matter of debt-to-income ratio. Memo (or anyone else) has to have enough "extra" income each month to offset the new payment and still be within guidelines (typically <40-45% of gross income).

[TX_92_Notch]

I've never seen that much difference between a 30yr and a 15yr. Most people would not catch that. 3 years ago, when we financed our house, there was about .25 or .5% difference, IIRC. With those differences, it made more sense to get the 30 and pay it like a 15 or 10 yr note. The differences are really important depending on how secure the borrower feels their job is.

My 2 cents.

He wasn't saying what you thought he said. The guy probably financed for 30 years a while back at 5.875 and didn't want to refi now for a lower rate.

When I did my refi, the difference between a 15 and 30 was nowhere near 2+ points.

[racrguy]

I dont think loans are front loaded... Its the fact that interest is usually calculated daily on a loan....

So day 1 you are being charged X% interest / 365 days. So you are paying that daily amount on the ENTIRE loan. Day 2 is the same daily interest rate x Day 1+day 2..

So if math were this simple... you have a $100k loan with a daily interest of .01%.... so day 1 you are charged $100,000 x 1.0001 = $100,010. Day 2 (since you havent made a payment) becomes $100,010 x 1.0001 = $100,020.01, etc... You pay much more in interest in the beginning due to the high loan value. To keep monthly payments the same, you pay very little principal in the beginning because of the large amounts of interest. Later on when the loan becomes $50k, you pay less interest therefore you same payment becomes more principal and less interest.

The first months payment will include roughly $300 in interest. Later when you have $50k balance, you will pay $150 in interest and therefore the same payment allows for more principal to be paid.

Thanks for saying the same thing I said lol.

[paul_376]

I got a 900 credit score, 3 houses and 2 Rolls Royces parked outside