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Retirement planning & paying off your home.

Posted on August 19, 2008 by Ray Williams (NMLS #216267).

Have you ever wondered how you could pay off your home sooner, save thousands and thousands of dollars in interest, prepare for retirement?

Here is a very simple way to save big, a loan refinance that many of our clients have found a great solution…

Streamlining into a shorter term loan…

Here is one example;

30 YR Fixed –streamline to new- 15 YR Fixed –lower rate, payment, reduce years, interest & MI

You purchased your home in June 2000 with an FHA 30 YR fixed rate loan at 7.00%. At that time it would have looked something like this;

 

Purchase price                                                                        $200,000.00

Less 3% down payment                                                               $6,000.00

Add UPMIP (2.25%)                                                                   $4,365.00

Principle balance of loan                                                         $198,365.00

Payment

Principle & Interest                                                                     $1,319.73

Monthly MI                                                                                 $     80.83

Total before escrows (taxes & insurance)                                   $1,400.56

 

After 8 years of making scheduled payments…96 payments of $1,400.56… you have paid $105,849 of interest, $7,394 of monthly MI (Mortgage Ins.), and $20,845 of principle.  You have a principle balance of $177,520 remaining, along with 264 more payments totaling $353,067.

 

Why would it make sense to refinance after 8 years?

 

It will save you $80,729 in interest to streamline your current FHA 30 year loan into a new FHA 15 year loan.  You can reduce the term of your mortgage by 7 years, lower your interest rate, eliminate the monthly MI and keep your payment about the same. Until Oct.1, 2008 the UPMIP (Up Front Mortgage Insurance Premium) on a new streamline is only 1.00%.  If you have made additional principle reductions over the years, your savings will be even greater.

Other streamline options;

Available options (all require interest rate reduction);

30 YR Fixed –streamline to new- 30 YR Fixed –lower rate and payment.

30 YR Fixed –streamline to new- 15 YR Fixed –lower rate, payment, reduce years, interest & MI

15 YR Fixed –streamline to new- 30 YR Fixed –lower payment, extend term.

15 YR Fixed –streamline to new- 15 YR Fixed –lower rate and payment.

1 YR ARM –streamline to new- 30 YR Fixed –lock in fixed rate, potentially lower payment.

3 YR ARM –streamline to new- 30 YR Fixed –lock in fixed rate, potentially lower payment.

5 YR ARM –streamline to new- 30 YR Fixed –lock in fixed rate, potentially lower payment.

Call for other options…

 

Give us a call or e-mail if you want to see specifics for your scenario!

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