Profile picture for lesleyeast

I am in the last 8 years of a 30 year mortgage. Should I refinance?

I am paying 5.25%. I am paying more principal than interest. Does it make sense to start a new mortgage and pay more interest than principal?
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December 30 2011 - Saint Louis
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What I get is a new loan of $63k ( 7/1 Arm using 3% rate ) and payment of $265, add the extra principal of 348 to equal your current payment and it pays off in 118 payments or 9.8 years.
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December 31 2011
Profile picture for lesleyeast

That payment amount includes escrow for insurance and taxes. As you can see I am paying more to the principal than interest. So does it make sense to refi?

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December 31 2011
Your figures do not add up. You say your payment is $890 but below you state your most recent payment included $320 principal and $293 in interest. That would mean your P and I payment is $613 and the rest is escrow which may include mi. Give the total breakdown of your monthly payment. 
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December 31 2011
The true answer to your question lies in your ultimate goal and your use/purpose for the property.  However, others have mentioned some good options including the ARM.  Yet that requires the discipline to pay extra each month.  Will you do that?  IF so, that 's a great option.

You will pay less in interest if you refinance to today's low rates.  

Study the Amortization schedule of a new 10 yr loan to see if that is right for you. It's probably the most logical and comparable to your current time frame.

 
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December 31 2011
One post assumes you can refinance for $1,700 in costs and get a 7 yr arm at 3%. I think you will find both hard to come by. It is worth calling a couple of lenders to see whta they will do.
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December 31 2011
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That does make sense.  Surprising.
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December 31 2011
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That is one of the very few times I have seen an arm mentioned that would make economic sense.
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December 30 2011
Actually it would help you to refinance. Assume that you could get a 7/1 ARM @ 3% with around $1700 in total closing cost. Your payment would be $608.33 and would be $281.67 less than the $890 you have now. If you continued to pay the $890, you would payoff your home in 6 years and 7 months, saving you 17 months @ $890 but costing you $1700 up front. No need to worry about the ARM since you payoff before reset.
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December 30 2011
With the $63K mortgage, 5.25%, payoff in 8 years, the monthly mortgage payment is $805.09
At 3.75%, 10 years term loan, assume there is no closing cost, in order to pay off the $63K mortgage in 8 years, Lesleyeast had to pay $760.62 a month, Lesleyeast saves $4,270 overall ($805.09-$760.02) x 96 months.
 But with the small loan amount, there is no leader, who is going to do the no closing cost loan, which is about $2,500 (title insurance, appraisal and all kind of the fees).
$4,270 - $2500 = $1,770 saving is not worth for the challenge ahead if Lesleyeast goes for the refinancing, not to mention if Lesleyeast wins the super lotto (unlikely) and Lesleyeast want to pay off early then He/She lose $2,500 closing cost.
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December 30 2011
Profile picture for the_country_hick
Use an online amortization calculator. Look at how much money is now going to principle. Then look at a 8 year at todays rates and see if it pays off or not. Do not use different time frames. That can give the wrong results as a longer time frame can distort the true benefits or costs involved.,
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December 30 2011
Profile picture for hpvanc
IF you can get a favorable rate on a low closing cost loan with a 10 year term it may be worthwhile.
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December 30 2011
Unless you get the loan with zero closing cost, which I doubt with that small loan, there is not worth to refinance.
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December 30 2011
Profile picture for lesleyeast
My loan balance is $63000, my payment is $890. Last payment , I paid $320 toward principal and $293 interest.I don't need to get any equity out of my house, but I keep hearing that it's crazy not to refinance and take advantage of these low rates. With 8 years to go, would I save anything?
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December 30 2011
What are you trying to do? If you want to cash out some equity and extend the term of the loan to 15, 20 or 30 years with a lower payment, then maybe. However, you will probably be paying more interest than if you just left it in place. You should compare amortization schedules for each option before you make your decision.
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December 30 2011
What is your loan balance?  How much is your payment and what amount is going towards principle?
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December 30 2011
 
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