Q. How do I compute accelerated mortgage payments? If I make two payments a month, how soon do I retire the loan?
A. Thanks for writing. We ran a couple of scenarios, not knowing what the dollar amount of your loan would be. But if it’s a 30-year, fixed-rate loan we figure you could have it paid off in nine or 10 years.
If you go to our payment calculator you can calculate exactly how long it would take. Fill in the "mortgage amount," "mortgage term" and "interest rate" and when your loan began. Then, in the area directly below labeled "Extra Payments," put in the additional amount you plan to pay each month. Then hit "show amortization table" and scroll down to see the results.
We might also suggest that you consider a 10-year or 15-year mortgage. On a 15-year you might save a quarter-point or more on your interest rate, and on a 10-year mortgage you could probably save close to a point. This could result in considerable savings in interest payments. The only downside we can think of is that if you get a 10- or 15-year mortgage you are obligated to make those larger payments, whereas making voluntary extra payments would get you off the hook should your financial circumstances change.
Try some different numbers on the calculator and see which one works best for you.
Q. I bought a condo little less than 6 months ago for $390,000. I put 5% down and have a first and second mortgage. The first is fixed at 6.375% for 3 years and the second is an adjustable HELCOC that started at 8.75% but is now 9.50%. Should I try to refinance and get a fixed-rate loan because of rising rates. My credit score is 755. I only have one debt which is school loan on which I owe $1,800.
A. Mortgage rates have been heading down since late June and our survey shows lots of lenders in the Los Angeles market offering 30-year fixed-rate mortgages for less than the 6.375% you’re paying on your primary loan and way less than the 9.5% you’re paying on your home equity line of credit.
So we think refinancing to a single, fixed-rate mortgage makes a lot of sense for you.
Start by using the rate search at the top of our mortgage page. Look for a lender like Priceline Mortgage or EverBank that are offering 5.875% loans with less than $1,000 in fees. (You’ll see lenders with lower rates but their fees are so much more we think Priceline or EverBank are a better deal.)
Then consider how much you could save.
If you put 5% down on a $390,000 condo, you borrowed $370,500. Since you’ve only been paying the interest, you still owe the full amount. So a 5.875% loan would cost $2,192 a month for principal and interest.
You didn’t tell us the split between how much you’re carrying on your primary mortgage and how much you’re carrying on your home equity loan.
But let’s say you’ve got 85% on your primary loan and 15% on the home equity line of credit.
If that’s the case, then you’ve got to paying around $2,100 in interest alone. When you must start repaying the principal in a few years that will jump to between $2,400 and $2,500.
Refinancing would assure you of a very good rate and keep your monthly payments within $100 of what you’re currently paying. It would also allow you to immediately begin paying off the principal, building equity in your condo and boosting your net worth.
|
e-mail article
print article
