Is a refi ever worth it for a .5% APR drop?

[Anonymous]

Got my first mortgage in 2004 at 5.875%.  In 2009 I refinanced to 4.125%, which is where I stand today.  Naturally, I have 21+ years left on the loan.  I don't know, that just bothers me.  My goal is to pay it off ASAP.  I've thought about refinancing it to a 15 year term.  I know I'd likely only drop my APR about .5% in doing this, so I'm not sure if it's even worth it.  I know the biggest argument is that one can just pay extra toward their principle each month and effectively accomplish the same thing with their 30 year mortgage as they could with a 15 year (paying it off faster).  Any advice here from the experts? 

[NC_Mtg_Loaner]

What's the current principle balance?

[sid33]

Would there be any additional cost out of pocket doing a refi? Best thing to do is put is down on paper w/ amortization schedule to see if it’s worth it. Or at least that’s what I would do. I’ll let the experts answer.

[NC_Mtg_Loaner]

What's the opportunity cost of spending $3000 in Closing Costs that you could use to invest elsewhere while those asset classes (stock values during the year 2017 for example) are growing at 30%?

Lots of homeowners have piece of mind knowing they are paying off this non-depreciable asset faster and at a lower rate which saves $50-100-200 per month, but any funds spent to do this can't be invested elsewhere.   Meanwhile the loss of 20 years compound growth can be  much greater.

You also could simply pay extra principle in your current loan which accelerates the amortization schedule like you mention.    After 10 years of a 30 year loan you've already paid roughly 80% of the interest on the life of this particular loan, but refinancing could still benefit you as you might notice a shorter term has lower or equal payments to what you are paying now.

[Anonymous]

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@NC_Mtg_Loaner wrote:

What's the current principle balance?

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$142k

@There are some months where I pay an extra $100 or $200 toward principle now.  I have a car note ending in a couple of months that I pay $500/mo toward (payment is only $250, but I pay double) that I'd easily be able to roll toward my mortgage.  I wouldn't think my monthly payment @ 15 years would be > $500 more than the 30 year mortgage that I'm in now, but I haven't crunched any numbers yet.  My goal is just to get the thing paid off ASAP and of course at the lowest cost possible.

[Anonymous]

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@Anonymous wrote:

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@NC_Mtg_Loaner wrote:

What's the current principle balance?

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$142k

@There are some months where I pay an extra $100 or $200 toward principle now.  I have a car note ending in a couple of months that I pay $500/mo toward (payment is only $250, but I pay double) that I'd easily be able to roll toward my mortgage.  I wouldn't think my monthly payment @ 15 years would be > $500 more than the 30 year mortgage that I'm in now, but I haven't crunched any numbers yet.  My goal is just to get the thing paid off ASAP and of course at the lowest cost possible.

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I agree with BBS here.  IMHO, it's better to have that 30-yr mortgage to fall back on while you pay extra toward the principle each month as life allows.  If I'm gathering this correctly, you're looking at paying X-thousands of dollars to do what you yourself can do while increasing your equity at your own pace.  Then again, I may be wrong (someone please correct me if I am) - I frequently AM.  On top of that, I've also had a few cocktails tonight as well ;-)

[Anonymous]

I guess I'd just like to hear more opinions on the subject.  It makes sense to just toss more toward the principle each month, but I'm not sure at what point the .5% interest rate change [if refinancing to a 15 year] would actually offset the cost of the refi and be "worth it" to consider.

Slightly off-topic, but are there any other tips/tricks to a quicker paydown?  I remember when I first got my mortgage before it was sold off a few times that the original lender would allow you to make 2 payments per month instead of 1... I think I had it set up for the 15th and 1st.  By doing it that way I remember that it ended up being almost like making an extra payment at the end of the year with the reduced interest from paying it just a little quicker.

[Anonymous]

I can write you up a fantastic amazing spreadsheet to do all the math, including the money you'd save and what that value would be if used to reduce debt or save in high yield savings.  Would probably take only 5-10 minutes to do the spreadsheet up.

[Anonymous]

If you've got the time, I certainly won't say no

ABCD, I'm going to shoot you a PM in the next few days if you don't mind in attempt to solicit some finance advice from you, as I'm intregued by some of your recent posts regarding the subject.

[Anonymous]

PM away, plenty of folks do lol.

As for the spreadsheet, I'm sitting at the cafe right now with my Surface open and really just need some details as to what we are calculating.

First, I have the current mortgage balance of course, plus the APR, plus the months left in the loan.

Then, I have the current mortgage balance, with the new APR and a field for how many months the new loan would need for payoff.  I would also have to roll-in the closing costs of the new loan.

Give me 5 minutes to toss it in and see what I find.