It’s Been Two Years Since Our Refinance

It’s Been Two Years Since Our Refinance

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: $0

Amount ‘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:

  • mb-201311contractIf 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.

17 thoughts on “It’s Been Two Years Since Our Refinance”

  1. What a good article! I did this very thing some years ago BUT now I wonder if I will regret this later. In other words that 3.375% rate that you have is a great rate but if/when rates and inflation take off will you and I regret not borrowing more or for a longer term. Not too long ago mortgage rates were over 10% plus points. My thought is maybe I should have extended my term and invested the money in a mutual fund or AT&T stock and benefitted from a yield over 5% while borrowing at 3%. Of course …IMHO… there is no better feeling than to not have a mortgage. But this may be flawed thinking. Your thoughts?

    • I personally don’t like debt so I wouldn’t take out more debt or extend the length of my debt because of the low rates, but I do know others who are perfectly comfortable and can use it to their advantage. Actually, when they first did my paperwork, for some reason they had me getting about $1,000 in cash out. When I complained, they pushed back on fixing it as they said it was a relatively small amount and the interest charge impact over time was negligable, but I wasn’t having it, and they ended up having to re-do the entire set of documents with a no-cash balance.

  2. I like this. Our experience is similar to yours, except we bought in summer 2009 at 5.375% 30 yr and refi’d November 2011 into 15 year 3.25%. We had been paying biweekly on the 30 year loan, but the increased payments on the 15 year loan just smoothed that extra out into each month, so overall we pay the same amount yearly in both cases. It just took about 10 years off the expected pay off date.

  3. “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”

    Hahahaha. Sounds like its gone pretty well!!

  4. I was talking with my friend about this the other day. While I don’t own any property yet and wasn’t able to take advantage of the rates, he refinanced his condo on a 15 year term, got rid of PMI and managaged to reduce his payment by about $20 a month, after everything was taken into account. When we talked about it, all he could talk about was how much faster the principal dropped. When you compare an amortization of the two, it’s honestly scary!

  5. I’ve been following you for a while, and to be clear, your principle hasn’t decreased at all, in fact, it’s risen during this time.
    The principal on your mortgage, however, has dropped nicely, congrats. We went from 5.25% with 19 years to go to a 3.5% 15 year at about the same time as you re-fied.

  6. When I refinanced about 10 years ago, I went with a 15 year loan. The only negative is the reduced interest deduction for tax purposes, which is offset by the lower interest. I will have it paid off in less than 4 years in time for retirement. That is definitely the best part!

    • True, but the way I look at is if I’m paying $5,000 less in interest and I lose $1,000 deduction on my tax refund, I’m still coming out four grand ahead. It’s all about the net worth impact.

  7. I bought my house in November 2010, with a 30 year 4.25% loan. I started the refi process in October 2012, and it took FOREVER – I ended up starting my new loan in January 2013, 30 years at 3.25%. Because it took so long, I ended up getting $1500 too much loan, so my original mortgage company wrote me a cheque, which I immediately popped back into the new loan as a payment on principal.

    On my original loan, I was paying an additional $522 per month. Now my payment is $200 less per month, and I pay an additional 722 per month.

    My loan payoff date is 2042, and I will be 67. This is horrifying to me, hence the additional principal payments. My targeted loan payoff date is 2024, and I will be 49.

    My payment amount has not changed with my refi, but I get an additional $200 a month toward principal, and right now each month, my additional principal payment shortens my loan period by 2 months! This will work until September 2014, at which point in order to continue to shorten the loan period by 2 months each payment, I will slowly have to increase the amount of principal each month – and I hope to be able to do that, to reduce my timeframe even more – and be paid off by 2021!

    • Good work. The only knock I would have is taking out another 30 year loan. The reason I don’t like this is because it effectively lengthend the total time in which you’ll be paying on your house. It sounds like you’re working to get that back on the right side of things, but I know many people don’t do the extra payment thing, and by taking a 30 year loan in turning it into a 35 or 40 year loan when it’s all said and done, they lose a lot of the benefit from the lower rate.

  8. There’s nothing much else like the feeling of paying off the mortgage. Having your gone before your kids go to college will give you good cash flow at a time that you may need it.

  9. We refinanced several times. And then, about 2.5 years ago, we paid off the whole enchilada. No more refinancing for us! 🙂

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