Author Topic: 15 years into Mortgage with overpayment, should I refi?  (Read 2430 times)

FrugalButEnjoyingLife

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15 years into Mortgage with overpayment, should I refi?
« on: January 02, 2015, 10:30:55 AM »
Hi All,
Happy Frugal New Year!

I'm 15 years into a fixed mortgage at 6%  that I've been overpaying each month.  I'm not sure it's worth refinancing and no mortgage company will help me do the math because they don't understand it or I'm not an easy client, so they avoid the questions.  How can calculate whether I've already saved as much as I can on lower interest by lowering my principle (thereby shortening my loan period by about 5 years), or if it's worth refinancing at this mid-point in my 30 year mortgage where I'm approaching the tipping point of paying more interest than principle.

Thanks!

waltworks

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Re: 15 years into Mortgage with overpayment, should I refi?
« Reply #1 on: January 02, 2015, 11:05:44 AM »
You don't need to get crazy here. It's simple.
-Find out what the refi you want will cost.
-Find out what rate you'll get.
-Use an amortization calculator to figure out whether your savings will exceed the cost of the refi, under whatever scenario you want (ie keep paying extra, pay minimum, whatever).

It's likely that you can save yourself a nice chunk of change if your current rate is 6%.

I'd be tempted to refi into a 15 year @ 3% or whatever, pay the minimum, and invest any extra money.

-Walt

Hi All,
Happy Frugal New Year!

I'm 15 years into a fixed mortgage at 6%  that I've been overpaying each month.  I'm not sure it's worth refinancing and no mortgage company will help me do the math because they don't understand it or I'm not an easy client, so they avoid the questions.  How can calculate whether I've already saved as much as I can on lower interest by lowering my principle (thereby shortening my loan period by about 5 years), or if it's worth refinancing at this mid-point in my 30 year mortgage where I'm approaching the tipping point of paying more interest than principle.

Thanks!

arebelspy

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Re: 15 years into Mortgage with overpayment, should I refi?
« Reply #2 on: January 02, 2015, 08:50:03 PM »
It's likely that you can save yourself a nice chunk of change if your current rate is 6%.

This.  Unless you're planning on paying it off very soon, it's probably worth refinancing.  But just calculate how much longer you'll carry it, how much in interest you'll save over that timeframe versus the cost of getting the new mortgage.
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FrugalButEnjoyingLife

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Re: 15 years into Mortgage with overpayment, should I refi?
« Reply #3 on: January 06, 2015, 06:45:56 PM »
Thanks for the replies and advice.

I guess the part that confuses me is the interest that I've already paid since these loans pay more interest than principle for the first half of the loan.  Is that all lost?  Should that be part of the savings vs. cost calculation?  Maybe I'm not thinking about this right.

arebelspy

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Re: 15 years into Mortgage with overpayment, should I refi?
« Reply #4 on: January 06, 2015, 08:04:17 PM »
Thanks for the replies and advice.

I guess the part that confuses me is the interest that I've already paid since these loans pay more interest than principle for the first half of the loan.  Is that all lost?  Should that be part of the savings vs. cost calculation?  Maybe I'm not thinking about this right.

No, that's irrelevant.  People often get tripped up by that, but all that is is saying you pay more in interest early because the balance is higher - and when it's lower, and you're sending in the same amount, more goes to principal.

We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

monarda

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Re: 15 years into Mortgage with overpayment, should I refi?
« Reply #5 on: January 06, 2015, 10:20:40 PM »
Here's a simple, user friendly calculator that might help you.
http://www.hsh.com/usnrcalc.html

It doesn't take into account the extra principal payments you've made, but you'll still get a rough idea.
I like Walt's suggestion, refi to a 3% 15 year loan. You're likely to save a lot.  (for example, nearly ~$40K on a loan that was originally $200K in January of 2000)
 

MDM

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Re: 15 years into Mortgage with overpayment, should I refi?
« Reply #6 on: January 06, 2015, 11:00:03 PM »
If you don't have one already, the spreadsheet you can download from http://office.microsoft.com/en-us/templates/loan-amortization-schedule-TC001019777.aspx should be helpful.