by Tim McLaughlin, Sr. Vice President, Weichert Financial Services.
If you are not still in the midst of a massive cleanup effort from the earthquake that rocked the Northeast last Tuesday (I already picked up the cup that knocked over on my desk), and if you have some free time while you are shut in this weekend from the negative effects of Hurricane Irene, now is a great time to pull out your laptop and run some numbers to see how truly affordable it is to finance that home of your dreams, or refinance your existing residence, if you haven’t already (that is, assuming you have power to run the computer). Let’s analyze some of the numbers.
- If you have a $300K, 30 year mortgage at say 4.99% (existing loan to Refinance or rate you would have gotten on a Purchase mortgage in 1Q11), your P&I payment would be ~$1,609. If you were Purchasing that same house today, or looking to Refinance that purchase from early 2011 or before, the P&I payment would be ~ $1,431, a savings of $178 a month, over $2,100 a year, and over $10,000 in just 5 years! A terrific opportunity to act now on both a Purchase and a Refinance.
- Or let’s say that you Purchased that same property in Q1 ($300K, 30 year mortgage at 4.99%), and now you wanted to refinance that mortgage into a 20 year mortgage at 3.99%. Your P&I payment would increase by $208 a month, BUT, you would cut 9 1/2 years off the life of your loan (assuming you originally closed in early 2011), and on the life of the loan payments, the interest saved in switching from the 30 year to a lower rate 20 year mortgage example above would be over $134,400 life of loan (assuming full term payments vs. a loan that originally closed in 1Q11).
- Let’s take another example which can apply to both Purchases and Refinances: Let’s assume you Purchased a house with a 30 year, $300K mortgage in August of 2008 at 6.5% (yes, those were the rates in mid-2008). Your P&I payment would be ~ $1,896 a month. Now it is three years later, and assuming no additional principal was paid, the loan amount would now be ~$289,252. If you Refinanced that loan into a 20 year mortgage at 3.99%, you would cut 7 years of payments off your loan AND, additionally, you would reduce your P&I payment to ~$1,752 a month, a monthly savings of $144 a month in addition to reducing the payment by 7 years. This scenario can work on 15 year and 10 year mortgages as well in many cases.
Don’t let the shaking earth, the sideways rain, and the howling winds get you down. The bright spot this weekend is we can help you analyze how to finance that new home at the cheapest rates in years, or save money on your existing mortgage by Refinancing. We will take the time to do it right and garner your trust. Ask us how…we can help…before the sun comes back on Monday!