Help: Refinace Math from 30yr to 15 yr

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samta09
Posts: 92
Joined: Mon Dec 28, 2009 6:45 pm

Help: Refinace Math from 30yr to 15 yr

Post by samta09 » Mon Sep 09, 2019 12:12 pm

Current Mortgage:
Amount: 416,000
Term: 30 years fixed
Rate: 3.625%
Payment: $1,897.17
Additional Principle: $1,086
Total Monthly Payment: $2,983.18
Total Interest paid so far: $28,566


Proposed Refinance:
Amount: $347,356 plus $10,000 (total refinanced cost, including points, titled, etc.) = $357,356.60
Term: 15 Years fixed
Payment: $2,382.82
Total interest in 15 years: $71,550

Difference in payment, including additional principle amount is $600 a month (2,983.18-2,383.82)

If I continue with 30 years mortgage and pay the additional principle of $1,086/month, the total interest will be $109,919.
If I refinance to the 15 years mortgage, and assume I invest the $600/month and generate 5% return for the next 15 years, I will pay $52,750 in interest. Here’s how I came up with this number:
Total Interest Paid so far in existing mortgage = $28,566
Total Interest will be paid in new 15 years mortgage = $71,550
Less Total Interest from $600/month assuming 5% return for 15 years = $47,366

Assuming my math is correct, I will save over $57,000 in interest by going with the 15 years refinance, despite paying $10,000 in fees.

Am I missing anything from these calculations? Please feel free to critique my math.

chevca
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Joined: Wed Jul 26, 2017 11:22 am

Re: Help: Refinace Math from 30yr to 15 yr

Post by chevca » Mon Sep 09, 2019 12:25 pm

The original loan amount and interest you have already paid don't matter anymore. They're gone. You need to compare all of this from the current mortgage balance and what will be better going forward from today.

HomeStretch
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Re: Help: Refinace Math from 30yr to 15 yr

Post by HomeStretch » Mon Sep 09, 2019 12:51 pm

+1

Your $600 monthly savings is correct only if the remaining term of your current mortgage is 15 years, i.e., identical to the term of your refi loan and you are using the same mortgage principal balance for the new and old loans.

To calculate your true monthly savings and payback period:

1. Using your current mortgage’s principal balance and interest rate, use Excel or online calculator to calculate what your monthly payment would be to pay it off over the same term (15 years) as your proposed refinance.

2. Determine your monthly refi savings (= 15-year monthly payment for current mortgage per Step 1 minus monthly payment amount for refinancing your current mortgage balance via 15 year refi loan).

3. Refi net cost (= points, fees, etc.) divided by monthly savings = # months payback.

Ryanlion8506
Posts: 207
Joined: Wed Sep 30, 2015 6:53 pm

Re: Help: Refinace Math from 30yr to 15 yr

Post by Ryanlion8506 » Tue Sep 10, 2019 5:11 am

Not sure who you are refinancing with, but that seems really expensive. Look at Lenderfi.com. I am in process of refinancing and found out about them here.

Topic Author
samta09
Posts: 92
Joined: Mon Dec 28, 2009 6:45 pm

Re: Help: Refinace Math from 30yr to 15 yr

Post by samta09 » Tue Sep 10, 2019 5:42 am

Ryanlion8506 wrote:
Tue Sep 10, 2019 5:11 am
Not sure who you are refinancing with, but that seems really expensive. Look at Lenderfi.com. I am in process of refinancing and found out about them here.
i got it from aimloan.com, 15 yrs fixed 2.5% with $8k in points. I'll take a look Lenderfi.com. I think Better.com doesn't have lender's fee so it might be a little cheaper.

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dm200
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Location: Washington DC area

Re: Help: Refinace Math from 30yr to 15 yr

Post by dm200 » Tue Sep 10, 2019 8:25 am

For more flexibility in the future and without paying the costs of a refinance, I would just pay down principal on the existing mortgage. You have a very good interest rate on the existing mortgage.

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Stinky
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Re: Help: Refinace Math from 30yr to 15 yr

Post by Stinky » Tue Sep 10, 2019 9:18 am

So you're currently at 3.625%, and proposing going to 2.50%? On a principle balance of $347,000? And paying $10,000 in closing costs? Is that all correct?

If so, your annual interest savings is about $4,250 (1.125% X $347,000). It would take over two years to pay back your $10,000 upfront cost.

Back when I was thinking about mortgage refinancing, anything over two years was a wobbler for me. You've got a great rate now - I'd probably keep until I could get the payback below two years. And if I never refinanced, I've still got a great rate at 3.625%.
It's a GREAT day to be alive - Travis Tritt

Jeep512
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Re: Help: Refinace Math from 30yr to 15 yr

Post by Jeep512 » Tue Sep 10, 2019 10:24 am

dm200 wrote:
Tue Sep 10, 2019 8:25 am
For more flexibility in the future and without paying the costs of a refinance, I would just pay down principal on the existing mortgage. You have a very good interest rate on the existing mortgage.
+1

Everytime that I've considered a refi, I come out almost as good if I just upped my current mortgage to the 15 year payment. This assumes a decent interest rate on your existing mortgage, of course.

Ryanlion8506
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Joined: Wed Sep 30, 2015 6:53 pm

Re: Help: Refinace Math from 30yr to 15 yr

Post by Ryanlion8506 » Tue Sep 10, 2019 12:03 pm

I’m currently at 4.25 and looking at anywhere from 3.0-3.25% depending on what I want to pay. Ranges between 700-3000. I would never pay anywhere near 10k to refi unless my rate was horrible. Grab a slightly higher rate, monthly will be little difference.

Ryanlion8506
Posts: 207
Joined: Wed Sep 30, 2015 6:53 pm

Re: Help: Refinace Math from 30yr to 15 yr

Post by Ryanlion8506 » Tue Sep 10, 2019 12:03 pm

And I’m going from 30 to 15

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