Our initial mortgages (yes, 's' as in more than one) was taken when we bought our house in October 2006, and consisted of:
*the main mortgage (80%), a 30-year at 6.375%
*a piggyback, amortized over 30 years, but a payout after 10 (or was it 15?) years. Rate: 8.125%.
In August 2010, we refinanced. The goals were:
(1) lower our payment
(2) lower out rate, and
(3) consolidate both loans into one.
In 2010, both (1) and (2) were reasonable wishes. However, (3) depended on the 80% home-ownership holy grail.
Fortunately for us, the appraiser came up with a value on our house that made us reach the 80%. What a sigh of relieve when I got that phone call!
So we refinanced, another 30-year at 4.75% this time. We are "saving" over $300 a month, but that means we've also added 2 years to the amount of time we'll be paying for this loan.
Now is July 2012, and rates are even lower than what they were 2 years ago. This time, there are 2 goals:
(1) lower our rate
(2) lower the loan period to 20, or, if at all possible, 15 years.
I've made a few calls, and both should be possible. I was quoted 3.625% for a 20-year.
The downside: payment would go up (about $150). But, we're at a place were we can afford that extra payment. So, is it worth it?
Ever heard "the more you spend, the more you save"?
It drives me nuts when I hear this in commercials, because it's just stupid to suggest to people that "the more they spend, the more they save". No! The more you spend, the more you spend. Period.
In this case, however, it would mean that over the period of 20 years, we would truly save over $100,000 in interest. I don't know about you, but that's not money I can just turn my nose up at.
But are you planning on staying in the house for 20 years? you're asking (yes, I can hear you).
Maybe not, but here's the kicker:
*30-year at 4.75%:
Principal paid to start is around $300. After almost 2 years, we're paying $350 towards principal
*20-year at 3.625%:
Principal paid to start is $720. That's $720 that's going towards equity and not in the bank's pocket.
Or put in other terms: I'm building equity in my house twice as fast.
Next step: call my mortgage officer to schedule a new appraisal.
Viewing the 'Mortgage' Category
Ok, I'm over-reacting a little, but here's the story:
I sent my mortgage payment with an extra $22.68 to go to our principal. First of all, it's the second months in a row I have to call them because they put extra payments in the escrow account vs. principal. Even though I had called prior and made sure that any and all extra would go toward principal, but anyway...
I sent the payment on 2/20 and called on 2/21 to rectify the mistake. On Friday 2/23, I see that nothing has changed so I write to customer service and get a response back saying this will be fixed.
My payment is due 3/1 and this is the part I'm over-reacting about because we're talking about a tiny amount of money: they applied my extra payment toward NEXT MONTH, which made means that I will pay a whole $1 or so extra in interest.
It's no so much the amount that bothers me (after all, we are talking about $1!!), but it's more that first of all, I've had to call many times, and write in order to get this done. I had called once, before making my very first payment, and was told that any extra payment were, by default, credited to the principal, which is apparently not true.
Second is that when I did this last month, the money was moved from escrow to principal right away. This time, it feels like they waited until my normal payment was due (3/1) and then fixed it so it would be credited to the principal after 3/1.
This means that on a one-person scale (me), it is $1, but what if they do this to a hundreds of thousands of customers every months. It does add up for them!