12-14-2009, 06:23 PM
Davester, you're right. I screwed up my math on this one. I just went back to double check it and I must have entered a shortened loan period. The amount the payment drops by is $530.
The calculator is currently down so I can't check that. One thing I do want to comment on is...
Because of amortization it can cause problems and it is most certainly logical. A couple years ago I was looking at refinancing from 7.25% to 6.25% and when I ran the math (many times and many ways) I found that I would end up paying more in the long run if I didn't get a rate below 6.25%. I couldn't, so I didn't refinance. The broker we were working with confirmed it wouldn't save us anything.
And this is all assuming that the difference in payment is put back in as an extra payment towards principal.
davester wrote:
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.
The calculator is currently down so I can't check that. One thing I do want to comment on is...
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.
Because of amortization it can cause problems and it is most certainly logical. A couple years ago I was looking at refinancing from 7.25% to 6.25% and when I ran the math (many times and many ways) I found that I would end up paying more in the long run if I didn't get a rate below 6.25%. I couldn't, so I didn't refinance. The broker we were working with confirmed it wouldn't save us anything.
And this is all assuming that the difference in payment is put back in as an extra payment towards principal.