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SPEEDBEAD.

Refinance complete!!!

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Just signed the papers last night.  We officially dropped our interest rate from 6.5% to 4.5% and there were no out-of-pocket fees. We received lender credits for most of the refinance and the costs were not rolled into our loan.

Monthly payments dropped $170 a month, but we will continue to pay what we were before. Rough amoritization table shows the loan will be paid off in 19 years or less. Over the life of the loan, this will save our family approximately $100k.

I would like to give a special thanks to nice_bass and RedlineRobert for pointing me in the right direction and offering up information to me.

Thanks again.

Wayne

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congrats!!!

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WTG Speed.  Heck of a difference right there.  Anytime you can save 100k, you're talking real money.

Got five bucks I can borrow?   :D

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"Ok sweetheart, since we were gonna spend $100k on interest anyway, now I can get that new bassboat right?"

:)

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LOL, I wish Robert.

Baby making will commence next year and by my calculations, the house will get paid off as he/she/they goes off to college.

Will be planning for it in the mean time, but that being freed up every month should be quite helpful.

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Here's how to save big dollars on the interest.

Ask for the amortization sheet which gives you a monthly breakdown of the loan.  How much goes toward interest, and how much goes toward principle each month.

We did this.  I assume home mortgages are still front end loaded so the bulk of the early payments is for interest with a small portion applied to the principle.

With each monthly payment add the amount of the next months payment that will go to principal, and you have eliminated that much interest from your total.  Do that each month, and you will pay off the loan in half the time.

If you make payment number one plus the principle for payment number two, you will then need to make your next monthly payment for number three, plus the principle for number four.

Keep in mind, if you do this, each month's payment will increase simply because the amount applied to the principle will be increased.  At some point, it may not be practical to make such large payments.

Nevertheless, if you do make an additional principle payment to your loan, you will have saved thousands of dollars, possibly tens of thousands.  It depends on the size of your loan.

One other thing to note.  Paying the next month's principle ahead of time does not mean you can skip the next payment. 

Check with your bank beforehand.  Years ago, banks frowned on the practice but it was legal.  Since more than forty years have passed, regulations may have changed.

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Here's how to save big dollars on the interest.

Ask for the amortization sheet which gives you a monthly breakdown of the loan. How much goes toward interest, and how much goes toward principle each month.

We did this. I assume home mortgages are still front end loaded so the bulk of the early payments is for interest with a small portion applied to the principle.

With each monthly payment add the amount of the next months payment that will go to principal, and you have eliminated that much interest from your total. Do that each month, and you will pay off the loan in half the time.

If you make payment number one plus the principle for payment number two, you will then need to make your next monthly payment for number three, plus the principle for number four.

Keep in mind, if you do this, each month's payment will increase simply because the amount applied to the principle will be increased. At some point, it may not be practical to make such large payments.

Nevertheless, if you do make an additional principle payment to your loan, you will have saved thousands of dollars, possibly tens of thousands. It depends on the size of your loan.

One other thing to note. Paying the next month's principle ahead of time does not mean you can skip the next payment.

Check with your bank beforehand. Years ago, banks frowned on the practice but it was legal. Since more than forty years have passed, regulations may have changed.

Essentially, that is what we are doing.

With the additional principle we pay each month, we are effectively making over 2X the principle payment for the time being.

Ultimately, we are trying to get to the 80% LTV threshold as quickly as possible so that we can take the money paid for PMI and put it toward the principle as well.  I have not factored this into the 19 year payoff figures, but obviously paying an addition $120/mo will only further reduce the amount of time we pay.

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I'm assuming your mortgage do not have a prepayment penalty..Those are most asinine provision in a mortgage contract... ::) I understand why, but still. lol.

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No prepay penalty.

Like you, I don't know why anyone would enter into that type of agreement.

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No prepay penalty.

Like you, I don't know why anyone would enter into that type of agreement.

I just assumed they didn't read it, or the rates with prepayment was lower than the one without. I don't have a mortgage nor am I a mortgage expert, but I wouldn't be surprised if contracts with prepayments had lower rates than ones without. Simply because the higher rate in contract without prepayment reflect the risk of the individual paying off mortgage early.

Just a theory, I don't know a lot about mortgage.  ;D

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Smart move Wayne.

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Baby making will commence next year .

Its all about practice, practice, practice.....

As for the mortgage, congrats.  Any relief is good.  I believe my rate is right at 4, or 4.5 as well.  I would hate for it to be higher.

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Congrats Speed...

We in the business are not all bad guys, no matter what the media or govt. says.

Anyhow, depending on what you make, you may also be able to write off mi on your taxes- so take note of what you have paid into mi. 

FHA will not allow a prepayment penalty- most of the time now it will only be on open ended second liens that contain the penalties-

just a dumb option and not practiced much anymore on first liens, illegal in  a lot of states at that.

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Congrats Speed...

We in the business are not all bad guys, no matter what the media or govt. says.

Anyhow, depending on what you make, you may also be able to write off mi on your taxes- so take note of what you have paid into mi.

FHA will not allow a prepayment penalty- most of the time now it will only be on open ended second liens that contain the penalties-

just a dumb option and not practiced much anymore on first liens, illegal in a lot of states at that.

Can I claim the monthly MI, the MI paid up front or both?

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Sweet move Wayne!  Congrats!

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Good for you Speedbead.  Is there going to be a special celebration at Road Trip #25?    ;)

BTW, here's a fairly easy ammort. schedule if anybody wants to play with their figures.

http://www.myamortizationchart.com/

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Great move and timing. We had a 15 yr at 5.2% and did a re-fi at 3.75 for 15 yr, no closing costs.

My wife went to school with the Sr. loan officer who has done this for us before. That helped. They also forgot to do an inspection, saving us $400.00. We are now paying the same per month toward the mortgage but should be done 2-3 years sooner. Rates inching up again. Anything extra you can pay to it is one of the best things you can do. If you knock down the principal, you're paying less interest in the long run. You can't change what you pay in total for the principal, but you can drastically change what you pay in total for the interest. What kills me is that my home is worth less but I am paying higher taxes.

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Ok, hold on a minute....I'm confused.  If the rate is a fixewd rate, isn't the whole point behind getting a lower interest rate on a refi to loosen up funds for higher yield investments?  I can see the psychological side, and the safety net owning real estate affords, but you are living in it - its not an investment, its an necessity.

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Ok, hold on a minute....I'm confused. If the rate is a fixewd rate, isn't the whole point behind getting a lower interest rate on a refi to loosen up funds for higher yield investments? I can see the psychological side, and the safety net owning real estate affords, but you are living in it - its not an investment, its an necessity.

That's definitely one way to look at it. If you are saavy at investing you could profit nicely by investing the savings. But as most of us are not, the savings down the road will be equal to a gain on an investment.

Or it can free up needed cash for other necessities such as a car, boat, college education etc.

Snuck boat in there just in case.

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I though maybe I was missing something big.  Gotcha.  FYI, whenever I get a big return on investments, and there's nothing to "buy" right then, I do throw some cash at the principal of my home.  That, and a few bonds.  Always seems safe to me.  But I have been doing pretty well with my nest egg.

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What really ticks me off is that up until 5 or 6 years ago, I was on track to retire at 55 with well over 7 figures saved, most of which is in my 401K and profit sharing, some in IRA's and some in investments. Took a big hit when the market sank and am now back to close to where I was, only I'll probably have to wait till I'm 65 like everyone else. Unless the market soars for 5 straight years.

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