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Probably a stupid refinancing mortgage question..

DeacOnCapeCod

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We are looking into refinancing our mortgage, we have found a lender where the 30 year mortgage had just a slightly higher rate than the 15.

We've crunched numbers on mortgage calculators about payments with or without making any extra payments.

Would it better to take the 30 year and make those extra payments directly to principal rather than the 15 ? Obviously, we would need to be disciplined enough to stick to it, but paying directly to the principal would seem to be a good option provided we can do this with the lender.

Is there something obvious that I might be missing?
 
Nope, you're on the right track. If you think you can beat your local housing appreciation in the market, you can always invest the difference in monthly payment there as well.
 
Only thing to add is to make sure the mortgage does NOT have a prepayment penalty clause in it.
 
We are looking into refinancing our mortgage, we have found a lender where the 30 year mortgage had just a slightly higher rate than the 15.

We've crunched numbers on mortgage calculators about payments with or without making any extra payments.

Would it better to take the 30 year and make those extra payments directly to principal rather than the 15 ? Obviously, we would need to be disciplined enough to stick to it, but paying directly to the principal would seem to be a good option provided we can do this with the lender.

Is there something obvious that I might be missing?

Best way that I've seen to look at this is: if something happens, you can stop paying "double" on the 30. You cannot stop paying the 15, or just pay half.
 
All of the above. Also if you are going to pay extra every month make sure the money is allocated to your principle. If you just pay extra it's possible it could apply towards your interest for future payments. I'm sure you'll do it correctly but wanted to put it out there.
 
The only bad thing is unless they're reamortizing every time you make a additional principal payment, the interest you're paying is waaaaaaaay higher over the life of the 30yr loan.
Additionally, if your 30yr rate is low, like 3%, then you may be better off investing what you'd put towards the additional principal and then paying off the remainder of the loan with that investment once it gets large enough. S&P averages like 6% a year? But nowadays who the hell knows.
 
i don't follow this last point. When you pay down extra principal this month, even if your payment next month doesn't change, isn't more of it forced to be allocated to principal since there isn't as much interest to be charged on the reduced principal?
 
One more thing "I've heard" about but never done the math on is if you pay 2 half payments though out the the month (say on the 1st and 15th) that you won't be paying interest on 1/2 of your monthly payment for 2 weeks. Again not sure how much that really saves but I'm sure someone on here would know if this is worth it or not.
This is one of those "sounds like a great idea but I'm too lazy to look into it" thing.
 
One more thing "I've heard" about but never done the math on is if you pay 2 half payments though out the the month (say on the 1st and 15th) that you won't be paying interest on 1/2 of your monthly payment for 2 weeks. Again not sure how much that really saves but I'm sure someone on here would know if this is worth it or not.
This is one of those "sounds like a great idea but I'm too lazy to look into it" thing.

My understanding is that most mortgage companies/banks have either done away with the bi-weekly payment option, or they charge a fee for it.
 
I have a WF mortgage I have been making lump sum payments because I was trying to get debt free ASAP and the interest portion definitely decreases as your principal goes down.
 
I have a WF mortgage I have been making lump sum payments because I was trying to get debt free ASAP and the interest portion definitely decreases as your principal goes down.

Side bar: I fucking hate Wells Fargo.
 
One more thing "I've heard" about but never done the math on is if you pay 2 half payments though out the the month (say on the 1st and 15th) that you won't be paying interest on 1/2 of your monthly payment for 2 weeks. Again not sure how much that really saves but I'm sure someone on here would know if this is worth it or not.
This is one of those "sounds like a great idea but I'm too lazy to look into it" thing.

Unless your APR is way higher than it should be or you live in a single wide, this is 100% not worth the effort. We're talking like $1,000 over the life of a $250,000 loan.
 
We have a 30 year mortgage, but instead of paying 12 annual payments, we pay half the monthly payment every two weeks. This results in 26 payments over the course of the year. It is essentially the same as making a 13th monthly payment, but paying every two weeks does help ever so slightly with the monthly interest accrual alluded to above. When we signed up, the bank gave us this option and offered us a slightly lower rate if we agreed to do it this way.

We'll pay off our 30 year mortgage in 25 years and save about 20% in interest payments over the life of the loan by doing it this way.
 
We have a 30 year mortgage, but instead of paying 12 annual payments, we pay half the monthly payment every two weeks. This results in 26 payments over the course of the year. It is essentially the same as making a 13th monthly payment, but paying every two weeks does help ever so slightly with the monthly interest accrual alluded to above. When we signed up, the bank gave us this option and offered us a slightly lower rate if we agreed to do it this way.

We'll pay off our 30 year mortgage in 25 years and save about 20% in interest payments over the life of the loan by doing it this way.

TITCR. It's not paying early that's a big deal. It's the extra principle; the additional payment a year is big, because it's pure principle.
 
i object on principle to your providing advice on how to pay down principal when you can't spell it
 
We are looking into refinancing our mortgage, we have found a lender where the 30 year mortgage had just a slightly higher rate than the 15.

We've crunched numbers on mortgage calculators about payments with or without making any extra payments.

Would it better to take the 30 year and make those extra payments directly to principal rather than the 15 ? Obviously, we would need to be disciplined enough to stick to it, but paying directly to the principal would seem to be a good option provided we can do this with the lender.

Is there something obvious that I might be missing?



back on topic.

I would go with the 30. It might be a slightly higher rate but as long as you can pay it off early, it shouldn't matter much. It gives you flexibility if anything happens in the future and you need more cash on hand (kids / kids in college / new car or toy / etc.). we almost double our payment every month.

30 year just dipped below 3% (I believe I saw). That is stupid low...thinking of buying a 2nd house at that rate.

:thumbsup:
 
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