I have a 30 yr. loan and want to refy to a 15 yr. loan. I've been in my home for 5 yrs.?

Question

Will the time clock on the 15 yr. loan start from 5 years ago when I bought the home or the day refy it? If it starts from the day I refinace to a 15 year loan, what happens to the payments I've been making for 5 years? My neighborhood is not appreciating quick enough so I just decided I want to pay off my home faster to gain more equity. Plus I may end up living here longer than I initally thought. Is the 15 year loan the way to go or should I do something else to pay it off faster?

Answer 1

depending on your equity and your rate of interest, it may be better to pay extra each month on your current note. send 2 separate checks with a note instructing your lender to apply the second check to your principal

Answer 2

the five years worth of payments are done. with a refi you will have essentially paid off a 30 yr loan in 5 years since the new refi will pay off the remaining balance of your origiinal loan.whatever you decide loan wise (15 or 30) it will start the day you finish signing th papers. the day you finish signing the refi papers your old loan is done and paid off. so ther is no more worrying about that, that is what happens during a refi. my suggestion to you is take a 30 yr. 15 yr will make your payments higher and since you're still up in the air as far as staying there, there's no reason to rush things. in fact, if you get a 30 yr, you'll get lower payments than you would a 15 yr AND if you make an additional 2 full payments each year, you can have the 30 yr paid off in about 17-18 years. (most people don't know that). honestly the only reason to fully pay off your house is if it;s the one you are going to die in. if you plan on moving, no need to pay it off ASAP since you can always refinance later to purchase your new home. going rate right now for par rates is 6.5 depending on credit. ARMS will be a little higher but will allow you some flexibility down the road.

Answer 3

If you refinance, you want to consider a longer term, not a shorter term. The effect would be to obtain the lowest possible payment. Once that is achieved, don't "double" your payments but invest the money in a suitable retirement/savings vehicle. If you pay off the mortgage you are losing the cheapest money you will ever be able to borrow and foregoing the best tax deduction the average citizen has. In fact, a 7% mortgage is only costing you between 4.5% and 5% when you consider the tax savings. I would hope you are getting more than 4.5% on your retirement funds!

A mortgage can be a wealth building tool if used correctly. Paying off a mortgage early or utilizing funds to pay off a mortgage earlier is like stuffing the money in your mattress. It is nice to have but it is doing nothing to make you financially secure since it just sits there. Increasing the equity in the house is not helping you as well. If you were to lose your job or became ill, which would you prefer, a retirement fund that has been increased because you have been regularly investing in it or paper wealth in the form of equity in your property. Do you think you could get a bank to lend you money when you didn't have a job? Sure you won't have a house note but again you can't eat or pay your other bills with equity.

If you were to ask any wealthy person out there, I will bet that the majority of them, despite the money in their bank accounts, still have a mortgage and have no plans of paying it off.

Answer 4

What's important is the tradeoff between rate and cost, and finding a new loan with a rate that makes it worthwhile to refinance without paying prohibitive costs. You can always pay extra if you've got it, and have it applied directly to principal.

Refinancing always start from the date of the new loan. Otherwise, in your case, it would be a 10 year loan, wouldn't it?

Don't sweat where the five years of payments went. They went to pay down your principal and pay off the interest at the time. You owe less money than you did then (I presume). You want to work on paying your loan off (a good investment, if not usually the best), the rate is far more important than anything having to do with the term, at least as long as you are confortable with the payments.

Here's an article where I go into more depth

http://www.searchlightcrusade.net/posts/1141598383.shtml

Answer 5

What is your current rate? How much is your payment? What you could do is figure out what your payment is on a 15 year loan - and start paying that in (2 payments) Why 2 payments? The first payment is your normal payment....the 2nd payment is noted in the memo section "APPLY TO PRINCIPLE ONLY"

Say you have a 80,000 loan at 8 percent rate on a 30 yr term your payment is 587.01 month

on a 15 yr term, your payment is 764.49

764.49 - 587.01 = so pay 177.48 on principle each month....That will cut down your principle and have it paid off in 15 years. or you can refinance, at the lower balance you owe - but you will have closing cost added in - so you need to determin if there is a benifit to you.

go to yahoo search - type in mortgage calculator and do the figures - Good luck to you.

Answer 6

Why would you want to pay loan initiation costs, new closing costs, someone's commissions, etc.???? Wouldn't it be a lot easier, and certainly cheaper, to pay more on the 30 year note??? If you double the payments, all of the "more money" is applied to principle...makes a lot more sense than what you are suggesting. In fact, I cannot imagine why you would want to do that unless you have a 30 year note that is at a very high interest rate. Check this one out, you are on a bad track. Just pay double payments, you loan will be paid out in a shorter period than 15 years!

Answer 7

ok, in case you should pay $1071 in accordance to month then that is okay. in case you paid $1071 in accordance to month then you fairly'd be paying the quantity if it were a 30 year mounted. That way you would finally end up with fairness after then 10 years and probably going with the IO loan you're turning out to be a decrease fee for that 10 years. (verify first to verify that there aren't any pre-pay consequences for making the better funds.) BTW, does that loan change to adjustable after the ten years? Taking an IO loan and nevertheless paying the completed volume as if it were a 30 twelve months mounted ought to provide help to pay a smaller fee contained in the form of family individuals economic issues.

Answer 8

Why pay off your house faster?
You probably have a low interest rate with a payment you can afford so just leave it.
If you refi your five years of payment is gone which isn't the end of the world but I believe your money would be put to better use in your 401K account or in an IRA.
Don't tie up all of your money in your house especially if it is not appreciating quickly.

Answer 9

Simply put, if you refinance (and pay the costs associated with it) will your rate be cheaper? Get a quote.

It will usually take 3 years for your to break even on a refi, so your plan of staying there may make it pay off.

If you will not save on a refi, and there are no pre-payment penalties, pay extra on your mortage each month. Look up amortization calculators and you can do the math yourself.

Answer 10

The new loan is exactly that, a NEW loan. The payments you have made have bought equity in your home. You might consider keeping the loan and make direct additional payments which will go to principle reduction exclusively. (Sounds like you are making wise financial decisions. Congrats.....most people do not do so.)

Answer 11

It really depends. If the rate is really good, save the money from refi-ing and invest the extra you want to pay every month. Rates have ticked up a bit and you may be geting a worse rate than your 30 year. Let me know if you have more questions.