Should I refi?

[Anonymous]

Opinions please:  I owe ~$90K on my house, it's worth $200K.  I have 11.5 years left on a 15 year fixed rate mortgage at 4.25 percent.  I can modify my loan with my current bank to a ten-year fixed at 3.25%.  We cureently pay extra each month.  My bank requires a $1500 fee to modify.  Should I do it?  Goal is to pay off quicker and also save on interest/fees.  Looking at my financial situation I have decided that paying off debt is priority one, and this Mortgage is the only debt remaining.  Thanks!

[Anonymous]

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EDIT:  mu current loan is 4.5 not 4.25 percent...sorry.

[tooleman694]

Looks like a good deal to me.

[webhopper]

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@Anonymous wrote:

Opinions please:  I owe ~$90K on my house, it's worth $200K.  I have 11.5 years left on a 15 year fixed rate mortgage at 4.25 percent.  I can modify my loan with my current bank to a ten-year fixed at 3.25%.  We cureently pay extra each month.  My bank requires a $1500 fee to modify.  Should I do it?  Goal is to pay off quicker and also save on interest/fees.  Looking at my financial situation I have decided that paying off debt is priority one, and this Mortgage is the only debt remaining.  Thanks!

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I ran the calculations in a couple of different ways using different assumptions:

Assuming you keep the current mortgage and make only the required payment, your total interest paid is: $25452

Assuming you keep the current mortgage and make the required payment + $100 per month, your total interest paid is: 23832

Assuming you keep the current mortgage and pay $1500 towards principle in Jan 2013 as well as $100 extra per month (instead of paying $1500 to refi), your total interest paid is: 20978

Assuming you refi to a 15 year mortgage and pay 100$ extra:  Your total interest paid is 19583

Assuming you refi to a 15 year mortgage and pay only the minimum: Your total interest paid is: 21808

Assuming you refi to a 15 year mortgage and pay $100 extra plus the difference b/w the current payment and the new payment (around $200): Your total interest paid is: 14390.

It looks like you could save yourself at least 10k in interest by refinancing IF you choose to continue to pay the current payment plus $100 extra per month.

My vote goes to refinance, and be diligent about paying the same amount that you've been paying even though the required payment has been reduced.

[deg757]

The general rule of thumb that we tell our clients is that if you have more than five years remaining on your loan and the interest rate difference is around 2% points then you should refinance. Usually if you have less than five year remaining, the interest savings won't pay for the sttlement charges to refinance. Keep in mind that I am not in the banking or lending business, just a CPA, so someone else might have better advice.