Refinancing a 30-year mortgage?
by Mortgage Rates on Monday, September 20th, 2010 | 3 Comments
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To go down 1% is no big deal. If you have no problem making the payments, and you can pay $100 or more each month, that would almost save you 10 years in the long run. Call your mortgage co and request an amortization of the loan. If it’s a 30 year loan, on the 15 years, you pay about 70% in interest. That’s how most if not all banks make their money.
You are correct – there are no legitimate 2 or 3% fixed rates out there. VA loan rates will be as good if not better than any conventional loan rate available but every lender has some discretion in the rate they will charge you. Since rates can and do change even throughout the day, there is no lender or website that can guarantee the lowest rate. To say or advertise that they can is illegal. You will have to shop and work with a lender you trust. The biggest advantage of a VA loan is that they don’t require a down payment on purchases and they lend a higher percentage of your home value on refinances than most programs.
To start with a $240K loan at 5.875% you must have been making P&I payments of at least $1550 to get to $200K after seven years which is probably more than your contract required. If you continue to do that you will pay your current loan off in 17 more years. If you refinance your balance plus your closing costs over a 15 year term at a current fixed rate of 4.375%, your payment goes down to $1540 and you still pay the loan off two years earlier for a total savings of over $41K.
Going to a 30 year term ($203K at 4.875%) would reduce your P&I to $1074 if a payment reduction is what you are after, especially if you think your income could be decreasing. The rate reduction with either option would recoup your closing costs in under two years, so unless you see rates improving in that time frame (I don’t) or a move to another home it is worth considering.
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