Comments on: Calculating Your Mortgage Refinance Payback Period

By: J.D.

J.D. — Thu, 15 Jan 2009 17:30:37 +0000

Kris and I still haven’t refinanced. We talked about it at the end of December, but we never pulled the trigger. Your post makes me want to get off my ass, get on the phone, and call around. I am, however, getting lots of e-mail from Lending Tree, which I had pinged back when I began to research a couple of weeks ago. Annoying.

By: Matt

Matt — Thu, 15 Jan 2009 17:11:58 +0000

Regarding Thomas’ comment:

The broker is using the same tools available to anyone. If you have the same information as the broker, you can, and should, run the numbers yourself.

I also have to disagree about getting the “real deal” when you ask the “experts” (brokers). Brokers are a necessary evil in the mortgage industry, but don’t always assume they are giving it to you straight. They are only paid when the deal is closed. Furthermore,they are paid extra when you get a bad deal (the higher the interest rate they sell you, the higher thier commision, likewise with higher closing costs), so what is the motivation for them to give the best deal available? Other than risk losing you to another broker, not a whole lot.

By: Mary

Mary — Thu, 15 Jan 2009 16:18:54 +0000

This is a timely post in light of news today that mortgage rates hit a new benchmark low.

By: thomas

thomas — Thu, 15 Jan 2009 05:38:43 +0000

calculators can only do so much. I’ve looked at refinancing using banrate and other sites but the numbers ended up being very different when it came to the real deal working with a broker. Online you can get some ideas, but only when you ask the experts will you get the real deal.

By: Stacey

Stacey — Thu, 15 Jan 2009 01:28:41 +0000

We’re attempting to refinance right now, from 6.75% to 4.75%, one year into the mortgage.

Our thoughts: A lower monthly bill is almost like an annual salary raise. The extra money may be there, but we’re quite comfortable living with our previous salary/mortage payment. We plan to continue paying the same amount, regardless of the interest rate and minimum payment. This should shave 10 years off of our mortgage, and give us a small monthly buffer if we come upon hard times.

Yes, yes, the tax deduction. For the size of our mortgage, itemizing won’t be worth it under the new rate, and would have only worked for the first 7 years under our old rate. Three cheers for lower interest rates and country living!

Thanks for the post, timely topic!

By: nickel

nickel — Wed, 14 Jan 2009 20:29:02 +0000

Yes, you are both correct. I’ve written a bit about this wrinkle in the past when we were deciding whether or not to refinance. Here is the link:

http://www.fivecentnickel.com/.....-mortgage/

I’ll update the article to point this out. Thanks.

By: Brandon

Brandon — Wed, 14 Jan 2009 17:49:11 +0000

Yeah, I was thinking the same thing as Matt here. I think that will give a pretty close result though unless you are changing the number of years by a lot. Also, I think it matters if the closing costs are prepaid or rolled into the new loan.

By: Matt

Matt — Wed, 14 Jan 2009 17:03:42 +0000

You failed to mention one important element of determining where you stand. Most people refinance into a standard loan length, like 30 years. But if your current mortgage has 25 years left on it, and you refinance to a 30 year mortgage, part of your lowered payment is due to extending the mortgage, which isn’t actually saving you any money. If a lower payment is your ONLY goal…..then why not extend the mortgage to 40 years? But if you want to see how much money you are saving, you need to compare apples-to-apples and the “monthly savings” portion of your post isn’t quite accurate. In order to calculate actual saved money, you should do the same calculations, but base your new payment on a loan length identical to the time left on your current loan.