Two years ago we completed the re-finance of our house. I thought I would go through some of the numbers and things that have happened.
Original Loan: 30 year mortgage, 5.875%, closed July 2007
New Loan: 15 year mortgage, 3.375%, closed November 2011
Increase in monthly payment: $157.69
Reduction in total term: 10 years, 8 months
Principal paid on new loan in the first 24 payments: 10.67%
Principal paid on old loan in prior 24 payments: 4.97%
Amount ‘extra’ paid on new loan over last 24 months: $0Amount ‘extra’ paid on old loan over the prior 24 payments: $4,144
Number of months before euphoria of making double the impact wore off: 2
Number of times I’ve regretted not taking a longer term re-finance so that I could have extra cash each month: ~5Average amount of time (in seconds) for me to completely dismiss that idea as ‘the crazy talking’: 4
Happiness on a scale of 1 to 10 when my tax preparer followed up to make sure that the reduced interest amount for 2012 was correct: 10
My calculated age at end of original 30 year term: 62My calculated age at end of new 15 year term: 52
My kids ages at end of original 30 year term: 28 and 26My kids ages at end of new 15 year term: 17 and 15
So, some things to take away from the above numbers:
- If we stay in our home and don’t make any adjustments to the mortgage, we will have it completely paid off prior to the kids starting college, which has always been a goal of mine.
- We would also have at least 10 years of being mortgage free while still being in the workforce. This would definitely help set the table for a more successful retirement.
- When I was still paying on the old mortgage but working through the details of the re-fi, the numbers were incredible to me. By paying essentially what I was paying anyways every month, I’d be making almost double the impact. That was awesome for the first couple of months. Luckily, I anticipated this.
- Paying the mortgage off early is not a priority right now. Any extra money goes toward savings goals such as saving for a new car, home improvements, travel, or retirement.
- If I were to pay the mortgage early, I would likely do so when I could pay off the entire balance at once. So, if I made a boatload in the stock market and my trading account balance (after taxes) exceeded my mortgage balance, it would be then that I might consider a payoff.
- We are nowhere near that possibility in our current state.
- But I’m OK with that.
- I think we chose the perfect term length. It doesn’t crimp our lifestyle and keeps us honest to our savings goals. The truth is that extra cash flow would be nice, but wouldn’t be worth it at all.
I know many of you must have taken advantage of the low rates back around the time they hit thier low point. I’d love to hear from those who have had their re-fi’s and how you’ve fared, emotionally and financially, in the subsequent months.