As you know, paying off our mortgage is the primary goal I am working on. My dream/stretch goal is to pay it off by December 2020, but currently June 2021 is the more realistic date. I have been toying around with ways to pay it off faster. I was recently approached by the financial institution where we do most of our banking about refinancing my mortgage with them. I told them they probably couldn’t make it worth it for me, but to give me a call anyways.
Well, they called me on Tuesday and presented some numbers to me. Here is the breakdown of the difference:
|Current Loan||New Loan|
|Years||17 years, 11 months||15 years starting 1/2017|
|Projected interest I will pay if I don’t make any extra payments||$76,193.77||$41,805.99|
|Interest I will pay with my extra payments||$19,556.22||$12,563.18|
|Payoff date with extra payments||June 01, 2021||October 01, 2021|
From first glance, the new loan has some great positives. 1) Much lower interest rate 2) pay a lot less in interest if I wasn’t making extra principle payments 3) shorter loan term and 4) ~$7,000 saved in interest with extra payments. The negatives are 1) higher monthly payments – about $60 2) five extra months added to when I could pay it off getting further away from my goal of December 2020. 3) Pretty high closing costs! 4) Taking out a higher debt amount that I currently have.
Over all, if I subtract my interest savings from closing costs, I would save about $3,600.00. That’s not a huge amount, but still sizable savings. Also, it would be much easier to snowflake random amounts with the new loan. I was assured that I could make principle payments at any time that would be applied immediately to my loan. My current loan does not allow me to do this and will only apply extra payments once a month. Perhaps I can at least make up the 5 months by making biweekly payments instead of monthly.
So readers, what should I do? Love to hear your advice on this!