12-13-2009, 06:32 PM
MAVIC, your math is wrong and what I said about the clock only being in your head is correct. I checked it since the numbers seemed impossible and I'm currently doing some real estate transactions and you scared me for a moment. The payment drops by $530 when refinancing the remaining principal to 5% after 7 years, NOT $173.
Running your 7% for 7 years, refi to 5%, plough the payment savings back in scenario results in a loan that is paid off in 34 years at a total cost of $574830 (P+I) versus $718563, a significant SAVINGS.
There is no way that refinancing at a lower interest rate can net you a loss unless you go with a loan with fees. It is simply not logical. As for the "hidden fees" you are worried about, it simply doesn't matter just so long as the fees are included as part of the interest rate. The underlying wholesale interest rate is irrelevant to the consumer for a refi. It is important when you first take out a loan because you can use points as a tax writeoff. However for a refi you can't, so only a fool would do a refi loan with points.
Running your 7% for 7 years, refi to 5%, plough the payment savings back in scenario results in a loan that is paid off in 34 years at a total cost of $574830 (P+I) versus $718563, a significant SAVINGS.
There is no way that refinancing at a lower interest rate can net you a loss unless you go with a loan with fees. It is simply not logical. As for the "hidden fees" you are worried about, it simply doesn't matter just so long as the fees are included as part of the interest rate. The underlying wholesale interest rate is irrelevant to the consumer for a refi. It is important when you first take out a loan because you can use points as a tax writeoff. However for a refi you can't, so only a fool would do a refi loan with points.