Go to Jeff Salisbury LWGate Home Page.From: <michael.e.kurela@us.pwcglobal.com>
Subject: Re: persfin-digest V5 #67
Date: Tue, 17 Nov 1998 17:12:19 -0500
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persfin-digest Tuesday, November 17 1998 Volume 05 : Number 067
>Date: Thu, 12 Nov 1998 14:51:41 -0500 (EST)
>From: <Camil@concentric.net>
>Subject: Are these NPNC Fees Reasonable
>I have a 30 year Mortgage that was Just bought by PNC Mortgage Corp.
>I have 25 years left with a balance of approximately 98,000. My current
>interest rate is 8.125%. I asked PNC could they refinance my Loan
>in house without any closing cost and Points. They could refinance the
loan
>today 10/12/98
>at 7.25 % with the following Fees.
>Total $1120.00
>My Questions are:
> 2. Is 7.25 a good interest rate to refinance a 8.125 interest mortgage ?
This would give me a annual savings of about 600.00 per year.
>3. In refinancing my 30 year mortgage in which I have paid 5 years into,
>should
> I get a new mortgage with a lower rate for the 25 years or should I
>refinance for
> 30 years ?
I'm going to guess that your payments are currently about $750 a month ?
Over the next 25 years, you will have paid about 136k in interest and 98k
in
principal.
If you take that 1120 and make a lump payment now in addition to your
mortgage payment, you will knock one year off and the result will be
129k interest paid and 98k principal.
If you refinance at 7.25% over 25 years you will pay about 119k in interest
and 98k in principal. Your monthly payment will be approximately $695.
Keeping your monthly payment at $750 a month (since you are used to
it anyway) you will have your mortgage paid off in about 20 years 2 months
and will have paid about 93k in interest and 98k in principal. Is there
even
such a thing as a 25 year mortgage ? I've seen only 30 or 15 year
residential with differrent flavors (fixed, variable, jumbo, balloon,
front-loaded,
back-loaded,etc.)
> 4. Is there ever a situation you would refinance a mortgage for a longer
>period than you
> have left of your you current mortgage, even if the NEW interest
rate
>is lower ? IF so why ?
If you really desired your monthly payments to be lower (about $670 per
month) and:
a) did not plan on making additional payments to principal
or care that you were paying about $147k in interest
or
b) planned on making the same monthly payment as you
are currently ($750) , thereby turning it into the same as the
20 year 2 month mortgage
or
c) planned on making a monthly payment that is more than
specified in the mortgage but less than you are currently paying,
thereby turning it into a shorter-than-30-year mortgage.
or
d) planned on making the $670 per month payment and
investing the $80 per month you would otherwise spend
on the current mortgage payment ($750 - 670) into a fairly
risk-free fixed income fund earning more than 7.25% (if
you can find one), then by the end of your mortgage you
will have done better than scenario b).
then yes, I would finance longer because it would give me an option
to mimick the shorter-term mortgage. This assumes you do not have a
prepayment penalty. Some (most ?) mortgages have an embedded
option in them to the borrower: you have the ability to fully pay the
balance due any time you want without penalty.
Stephen Foulks, does this generally agree with your experience in
personal finance ? Most of my experience has been with securities
trading, institutional investing, and portfolio analysis. If you are
reading
this one, I'm going to defer to your advice.
> 5. Based on the Prime Interest rate at anytime what would be considered a
>good and fair mortgage loan rate ?
> Prime + ?
As far as I know, this really varies from state to state. I've seen
Pennsylvania
rates recent;y as low as 6.5%, 0 points, 5% down.
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