Example of Refinancing - page 2
Let's look at another example and a possible reason to refinance.
Example #2
Loan: $250,000
Rate: fixed
Payments: principal plus interest
If the duration is 30 years and the interest rate 6%, the monthly payments are: $1,498 and the total interest: 289,550.
If the duration is 15 years and the interest rate 5,5%, the monthly payments are: $2,043 and the total interest: 117,650.
Additional expense per month: $545
Total savings in interest costs: $171,900
Now we will adjust the length of the mortgage
If we increased the term of the mortgage it would lower our monthly payments but increase the total amount we would pay on interest. On the contrary if we decrease the term it will lower our interest rate and also the total interest cost as we pay off sooner. The point is that our monthly payments will be higher because we will be paying more of the principal each month.Example #2
Loan: $250,000
Rate: fixed
Payments: principal plus interest
If the duration is 30 years and the interest rate 6%, the monthly payments are: $1,498 and the total interest: 289,550.
If the duration is 15 years and the interest rate 5,5%, the monthly payments are: $2,043 and the total interest: 117,650.
Additional expense per month: $545
Total savings in interest costs: $171,900
