I was recently talking with a co-worker about the economy, and the subject of mortgages and refinancing came up. I mentioned that anyone with a rate over 5 percent should consider refinancing and he posed an interesting question.
“I only have nine years left on my mortgage. Refinancing wouldn’t make any sense for me, would it? Most of my payment is going toward principle now. Wouldn’t refinancing be foolish?”
After discovering he bought his home 21 years ago for $250,000 with a 6.875 percent interest rate, I ran an amortization table. He was paying around $1,642.32 per month (principle and interest) and over the nine remaining years of his current mortgage, would spend an additional $44,628 in interest. It was true that the majority of his current payment was going toward principle but with interest rates at 2.75 percent (or even less in some cases), I had a hunch he would save some cash … BIG time. Here’s what I found out:
Using Quicken Loans (where he could determine the term of his mortgage), he could potentially get a nine year loan at 2.75 percent. His remaining balance on his old loan was $131,000 give-or-take. His new payment (principle and interest) would be only $1,370.63, saving him over $29,342 on his payment amount over the next nine years AND saving him $27,600 in interest.
I’d say, yeah, it was worth it to refinance even with only nine years remaining on his mortgage.
If you’re curious about Quicken Loans, give them a look to see how they can custom tailor a mortgage for your needs and more importantly, tailor one for your GOALS. Quicken Loans can quickly customize a loan for between 8 and 30 years, refinance up to $417,000, and do it for up to 95 percent of your home’s value.
Additionally, Quicken Loans features incredibly fast closings (one customer closed in only 21 days), and you can get refinanced through the nation’s largest online lender according to National Mortgage News.