I’m doing a bit of financial planning this weekend, and one question is whether to pay a large lump sum against our existing mortgage or not. We would refinance the small, left over amount (14k). Our existing rate is 5.375%, but I don’t really expect to get that next year. OTOH I’m not really sure what to use in my estimate. 8%? 7%?
What’s your opinion?
If I’m reading this right, you’ll have the mortgage down to about $14k, and you want to refinance that?
I doubt you’ll be able to get anywhere near as low as 5.375% next year, and I’d be surprised if any lenders would be willing to even mess with something so small - around here, $14k is less than four regular monthly payments - and I wouldn’t expect them to be willing to absorb the processing and closing costs.
:eek:
This is Mississippi. 
14k is about 14 months’ payments on our current mortgage.
Hubby also has the option to take a private sector job, and continue the 1K payments for about 18 months to 2 yrs to pay off the debt.
We are just running numbers for different scenarios.
Thanks for your input tho. 
ETA: there are homes here with payments that high, I’m sure. Ours just isn’t one of them.
Some prognosticators expect mortgage rates to increase somewhat in the next 12 months. I’ve seen some predictions that the average 30-year fixed rate will be around 7-7.5% in 12 months. Of course the people who make these predictions have been wrong about them every time for the last 6 or 7 years. I especially like when they say, “Rates are at historical lows. They have nowhere to go but up.” And then they go down again.
Current rates take into account everything we know about the current economy and predictions about the future economy. If someone really had more than a guess about where rates will go in 12 months he could make a killing.
I’m glad you phrased it as opinion - because there is a large element of WAG-ing here -so much IRL can and will affect this - things we never can think of, but also just what oil, housing, world events do over the next few months…
My guess is that July 19th 2008 actual borrow on Mortgage Interest Rates will be above - but not be fully 1% higher - than they are today where the National average is 6.73% for a 30 yr mortgage.
I think the chances that the rates will be lower is significantly less than that they will be higher – but having said that, I think 6.4% is more likely than 8.5%. My comfort with that prediction is fairly high barring a catastrophe.
Following on what jimmmy said …
If you look at rates 1% higher & 1% lower than today’s rate you’ll have bracketed the possiblities. I think you’ll find the $5 difference in payemnts based on those rates will be far overshadowed by the multi-hundred dollar closing costs of any refi. And you have no way whatsoever of estimating what those will be; each lender is different & they add & subtract fees apparently at random to manage their income.
Excellent advice, LSLGuy.
The reason for figuring it was not so much for the payment amount, as for ‘how much more interest will I incur by financing this 14k’. But you’re right, there won’t be much difference.
Example: save $30k by paying down on mortgage - spend $5k financing = net savings of $25k.
And thanks also, jimmmy and Gus.