15 year vs 30 year refi

[Kev Williams]

the short version: we need to refi plus cash out-
15 years 2.5% payment $1334
30 years 2.875% payment $830
difference: $504

question: how to calculate the difference between adding $504 to the $830, or just paying the $1334?

Obviously the higher rate will take longer than 15 years, but how much longer?

[Richard Baxter]

No but I have a bridge for sale.

[John K Jordan]

You can use a calculator with financial formulas (been so long I can't remember the details), make a spreadsheet (what I did last time), ask your bank or mortgage company to calculate it for you, or use one of the on-line calculators.

Dave Ramsey's calculator lets you calculate the payback amount without paying any extra each month, then add the extra to see the difference. To compare the 15 vs 30 at different interest rates I'd write down the numbers for the 15 year scenario then repeat the calculation for the 30 year case and apply the extra amount in step 2.
https://www.daveramsey.com/mortgage-payoff-calculator

Maybe make sure your lender doesn't have an early payoff penalty. Mine didn't (maybe because the interest rate was the same regardless of the time period) but I hear some do, or at least used to. Sure is nice to have everything paid off.

JKJ

the short version: we need to refi plus cash out-
15 years 2.5% payment $1334
30 years 2.875% payment $830
difference: $504

question: how to calculate the difference between adding $504 to the $830, or just paying the $1334?

Obviously the higher rate will take longer than 15 years, but how much longer?

[Bill Dufour]

I paid about 100 a month extra towards our loan. At first I wrote checks then did it online. With checks I put a memo "extra to principa. When I paid the loan off they said I had an extra 3,000 in payments in my account. They never paid the principal down with the online payments. Bunch of crooks, PNC Bank.
Bill D

[Kev Williams]

Bill, ouch!

[Lisa Starr]

Kev,

The 30 year mortgage will cost you about $59,000 in extra interest over the 15 year.

We've found that our best option over the years has been to go with the longer term. If you dealing with a credit union, ours was very willing to take an automatic payment each week and credit it each week as well. That alone knocked a couple years of the loan. Anytime either of us received a raise at work, 50% of the increase was immediately added to our payment amount. In the end, we paid off a 30 year mortgage in just over 17 years.

[Wade Lippman]

Kev,

The 30 year mortgage will cost you about $59,000 in extra interest over the 15 year.

We've found that our best option over the years has been to go with the longer term. If you dealing with a credit union, ours was very willing to take an automatic payment each week and credit it each week as well. That alone knocked a couple years of the loan. Anytime either of us received a raise at work, 50% of the increase was immediately added to our payment amount. In the end, we paid off a 30 year mortgage in just over 17 years.

If 15years is a lower interest rate then 30years, wouldn't you have saved even more with a 15 year mortgage?

[Jason Roehl]

If 15years is a lower interest rate then 30years, wouldn't you have saved even more with a 15 year mortgage?

She probably would have, but having a 30-year loan gives people cash-flow flexibility in case of a loss of income. Make double payments (extra to principal) from the start, then if there's a change in job status for a few months, you can pay just the regular payment. I seem to recall calculating it as about 10 years to payoff (but don't quote me on that) with double payments on a 30-year mortgage.

[Kev Williams]

Just did a calculation, $200k loan 3% 30 years, payment is $842, adding $842 each month will pay off the loan in 11 years 7 months...

Same amount at 2.8% for 15 years, payment is $1362, a difference of $520... now add that $520 to the 30 year payment, and the loan will pay off in 15 years 4 months-- nearly a wash...

[Jason Roehl]

Just did a calculation, $200k loan 3% 30 years, payment is $842, adding $842 each month will pay off the loan in 11 years 7 months...

Same amount at 2.8% for 15 years, payment is $1362, a difference of $520... now add that $520 to the 30 year payment, and the loan will pay off in 15 years 4 months-- nearly a wash...

So what is the payoff time on the 15-year loan if an extra $322 is paid per month (the difference between a double payment on the 30-year, and the payment on the 15-year)?

[Wade Lippman]

Just did a calculation, $200k loan 3% 30 years, payment is $842, adding $842 each month will pay off the loan in 11 years 7 months...

Same amount at 2.8% for 15 years, payment is $1362, a difference of $520... now add that $520 to the 30 year payment, and the loan will pay off in 15 years 4 months-- nearly a wash...

4 payments of $1,362 is $5,200. Not really a wash.

[Kev Williams]

ok, maybe not "nearly", but $5200/15 years is $28.88 a month-- many people's credit card interest is higher than that. Just sayin'

[John Stankus]

Bankrate.com has an additional payment calculator (and there are several others out on the internet)

https://www.bankrate.com/calculators...alculator.aspx

The trade off comes down to balancing whether minimizing total interest paid vs. flexibility in cash flow is more important to you. The 15 year note minimizes total interest, the 30 year with extra to principal allows for a lower payment if there are some months where that extra $504 is too much to spare out of the budget.

John

[Ron Citerone]

[QUOTE=John Stankus
The trade off comes down to balancing whether minimizing total interest paid vs. flexibility in cash flow is more important to you. The 15 year note minimizes total interest, the 30 year with extra to principal allows for a lower payment if there are some months where that extra $504 is too much to spare out of the budget.

John[/QUOTE]

That sums it up in my mind.

[Malcolm McLeod]

John's link will show the 'how'; 90sec. Excel-session says the 'accelerated' 30-yr mortgage will take 186 months (payments) - - +/- a month or so for compounding, fees, fines, and bribes.