Q about mortgage payments.

[Semidevil]

So instead of refinancing our fixed 30 year to a 15 year, if I just pay extra principal each month, do I get the same effect and savings as a 15 year mortgage? Why do people choose to refinanace to a reduced time, pay fees, and make additional monthly payments when all they can do is voluntarily pay extra each month? Do I get extra beniefits if am 'officially' on a 15 year mortgage?

I also understand that if I cut my mortgage contract in half, that does not necessarily mean that my monthly payments will double. If I want to pay off my 30 year mortgage in 15 years, is there a certain % of extra prinicpal I shoud pay?

 

[Jadow]

Just paying extra gets you basically the same effect of a 15yr mortgage, except that a 15 year might have a slightly lower interest rate than a 30 year.

if you have excel, google amortization schedule spreadsheets and you'll be able to find some that you can run the numbers wiht. there's also online calculators.

 

[Greenman]

I believe you can indeed make extra payments and reduce the loan term. Though I would imagine that there are as many variables as there loan types. Your lender would be the place to ask this question.

 

[sniperruff]

Originally posted by: Jadow
Just paying extra gets you basically the same effect of a 15yr mortgage, except that a 15 year might have a slightly lower interest rate than a 30 year.

if you have excel, google amortization schedule spreadsheets and you'll be able to find some that you can run the numbers wiht. there's also online calculators.

yes expect lower APR with a shorter-term loan.

 

[Codewiz]

Yeah, if you refinance, you can get a lower rate and maybe almost the same payment......

 

[IronWing]

As folks above said, you might get a lower rate. Also, in some cases, it is possible to drop PMI with the refi. We went from a 30 to a 15 with 3 years paid on the 30 plus $100/month extra principle on the 30. Our rate went from 7.875 to 5.125. Over the life of the loan we will save over 100k in interest and PMI while our total monthly payments went down because we no longer pay in the extra $100/month. If we had not been making the extra $100/month payments the interest savings for the straight 30yr to 15yr refi would have been 140K. In our case the bank was offering a flat rate fee $750 refi loan. The refi paid for itself in 4 months.

You really need to do the math before jumping. We keep watching the rates to see if we can jump to a 10 yr fixed but the rates never get quite low enough to justify the fees.

 

[Slew Foot]

Some loans have a prepayment penalty make sure yours doesnt. Most 15 years have a lower interest rate, but paying extra principle on your 30 year can have the same effect with more freedom.

 

[compman25]

Originally posted by: Slew Foot
Some loans have a prepayment penalty make sure yours doesnt. Most 15 years have a lower interest rate, but paying extra principle on your 30 year can have the same effect with more freedom.

Not only prepayment restrictions, some will only accept one or two extra payments a yr.

 

[olds]

One extra payment a year and a 30 year note will pay off in about 21 years. +-

 

[new2AMD]

Use this

 

[EagleKeeper]

Make sure that the lender knows the extra payment is to be applied to the principal.

It is best to have two checks, with one explicitly stated

 

[alkemyst]

Originally posted by: Semidevil
So instead of refinancing our fixed 30 year to a 15 year, if I just pay extra principal each month, do I get the same effect and savings as a 15 year mortgage? Why do people choose to refinanace to a reduced time, pay fees, and make additional monthly payments when all they can do is voluntarily pay extra each month? Do I get extra beniefits if am 'officially' on a 15 year mortgage?

I also understand that if I cut my mortgage contract in half, that does not necessarily mean that my monthly payments will double. If I want to pay off my 30 year mortgage in 15 years, is there a certain % of extra prinicpal I shoud pay?

Everything but the rate difference.

For MOST people it's smarter to pick a 30 year even if you anticipate paying it off sooner.

 

[Scarpozzi]

Just make sure there's no penalty for paying it off sooner. Some of the crappy mortgage companies out there will pull that crap.

You should be fine though and be able to pay more. Only refinance if it saves you more than what it costs to refinance. It's often best to speak to your current mortgage company first as they may be able to save you a few thousand in closing costs and fees just because you've already got an account with them and have already done the paperwork once before.

 

[ViviTheMage]

woah, how is it that a 15 year mortgage is barely 100$ more then my 30 year??

I just went and used a mortgage calculator and the difference is so small!

 

[vi edit]

Originally posted by: ViviTheMage
woah, how is it that a 15 year mortgage is barely 100$ more then my 30 year??

I just went and used a mortgage calculator and the difference is so small!

Depends on the price of the home and the interest rates involved.

A $100k house won't have that much of a difference between a 30 year at 6% and a 15 year at 5%.

Now look at a $350k house at 6% & 7.5% and see how much of a difference there is.

 

[ViviTheMage]

Originally posted by: vi edit

Originally posted by: ViviTheMage
woah, how is it that a 15 year mortgage is barely 100$ more then my 30 year??

I just went and used a mortgage calculator and the difference is so small!

Depends on the price of the home and the interest rates involved.

A $100k house won't have that much of a difference between a 30 year at 6% and a 15 year at 5%.

Now look at a $350k house at 6% & 7.5% and see how much of a difference there is.

yeah ,but that means if I switch, I will have it paid of much sooner, I assume more go towards principle then interest too in a 15 year.