Just a heads up to dopers with existing mortgages. Some of the larger mortgage companies will allow you to change the terms on your mortgage over the phone and will re-index your mortgage to the a new lower rate at no cost to the borrower. The upside is that you lower your mortgage rate without the normal doc and legal costs of applying for a new loan. The downside is that the lowered rate is not quite as low (ie 6.375 vs 6.0) as you could get with a brand new conventional loan but you don’t pay the processing costs, doc fees etc. etc. normally required with a new loan.
My accountant gave me a heads up on this not very well know opportunity a few weeks ago. I didn’t think much about it at the time, but given the recent southward plunge in mortgage rates I had some time yesterday and called my mortgage holder Wells Fargo. They re-indexed my loan to 6.375% from 6.875% over the phone which saves me about 50. per month or 600. per year in interest. Not bad for a phone call.
I don’t know if all mortgage vendors offer this and I had to ask about it via the 800 number on my monthly mortgage invoice as this opportunity is not mentioned anywhere on their website, and when I tried to use their website to see if their were refinance options they essentially told me " There are no products we offer like that".
No guarantee but it might be worth a call. A little interest deduction goes a long, long way. Within limits, in the current environment if you have good credit and are current with your mortgage it makes sense for a mortgage company to hold onto you if they can, even at a slighty lower rate.
A co-worker told me that by making one extra house payment per year (i.e., dividing the monthly payment by 12 and adding that amount to each monthly payment) a homebuyer can shave 11 years off of a 30-year loan. Is this true?
One I heard a guy mention recently was to double pay your principle every month. Your principle payment will increase gradually over the life of your loan, so it’s a gradual adjustment for you. For example, my current month’s principle payment is $285.03, so I would add an extra $285.03 to my mortgage payment. Make sure that you indicate that it goes toward principal and not pre-paying interest or escrow.
In reality I’ve always paid about $460 extra per month extra, as it makes my payment a nice round number. So I paid down about $10k of my principal last year instead of the $3.5K that I would have normally. I have no idea how this actually affects the life of my loan but it certainly increases my equity, which is currently an objective. Between appreciation and paying down my mortgage I’ve increased equity about 8-10% in the first year.
It only took off about 5 1/2 years in a case I set up. I used a spreadsheet to lay out the following:
$100,000 principal at 6% for 30 years. The payment (principal & interest only) was $600, which worked out to an odd payment amount on the last payment, but was a nice round number for the example. Adding $50 ($600/12) to the payment amount paid the mortgage off in 294 months, or 24 1/2 years.
Johnny, I can send the spreadsheet to you if you’re interested in playing with it.
One suggestion that a financial analyst had for me was to NOT pay off the mortgage early. Doing so does build equity for you, but it’s in a relatively illiquid asset, and it reduces the tax deduction in coming years. He said we were better to refinance to a lower interest rate, and invest the difference in the stock market.
Now - that was a couple of years ago, when the market was going up like a roman candle. Now? It’s you’re call where to put it…
My favorite website for those times when my obsession with my mortgage just must be fed somehow, is www.bankrate.com
For those of you wondering about the effect of extra payments/lower rates, click on the “calculators” tab. It will even give you a full amortization schedule if you want it.
I did exactly that just last week. When my wife and I got the house loan in May of 2001, we had a 7.25% interest rate. Locked in last week at 6.35% and re-upped the life of the loan to 30 years. It is going to save us just short of $100 a month.
That is good advice on not paying down the principle faster, unless you are trying to build up the equity level so you can stop paying PMI. When we got our loan, if we had stuck to the payment schedule, we would have been shelling out an additional $80 a month for ten years of something that is of no benefit to me!
Of course, now that the payments are lower, I still plan on sending in the same amount every month! Build equity faster and get rid of the PMI that much faster!
Do you have any idea who you spoke with or even what department? I have a Wells-Fargo mortgage as well and after calling being bounced around 6 or 7 times, I finally spoke with somebody who was adamant that WF didn’t offer that and never had. I’d appreciate any advice you have.
Keep in mind that PMI (Private Mortgage Insurance) can be dropped when the ratio of mortgage debt to total equity drops below a certain level, often 80%. This means that even if your mortgage balance didn’t drop much, if the current market value of your house goes up, you might be able to drop the PMI.
It almost exactly cuts the life of the loan in half. To cut it exactly in half, get an amortization sheet and pay two month’s worth of principal each month (not this month doubled, but this month and next month. Next month, pay the principal for months 3 and 4…).
The earlier you make extra payments, the better. If you pay $25 extra on just the first payment of a 20 year loan, even if you never do it again, it will save you several thousand in interest over the life of the loan.
We just refinanced our house because the rates were in the 5’s for a 15 year loan. We had 22 years remaining on our original loan, which was 6 1/2%, I believe. We had all the fees rolled into the new loan and are paying an extra hundred bucks a month. However, we are cutting 7 years off the loan and saving about $70,000 over the life of the loan, IIRC.
Rates are great now! I remember when we were first married, rates were ~10%.
This is the number I called - It should be on the back of your Wells Fargo monthly mortgage statement.
800-443-3429 is the number on the back of mine. It says “Stop by a Wells Fargo Mortgage Store in your area or call 800-443-3429”. Yours may possibly be different.
I simply told them that I understood from my acct. that they offered the option to re-index my remaining mortage at lower rate vs my paying their note off and getting a new mortage elsewhere. The guy on the other end said yes we do offer that option. He also offered me the option to get a home equity loan and take some cash out of the deal, but I declined and said I just wanted to reduce the rate. He ran my credit and asked me a few questions while on the phone. The new, lower rate was locked in while on the phone. It was approved in about 10-15 minutes and I will shortly have the paperwork for the new loan.
I called the number again this evening to confirm that the program was offered because someone I had told about it (you) was not being told it existed. She was a bit confused that I was asking about this program and took my loan # and after a minute said that yes, I qualified for this refinance option, but not every loan does. So apparently the refinance option exists selectively. I suppose the real question is if your current loan qualifies for the refi option, and I have no idea what criteria they are using to determine this. But the program exists even if it is not widely touted (for obvious reasons).