Extra payments seem to make a lot of sense if you’re refinancing now

Submitted by PlatypusTrapper t3_z94mxt in personalfinance

I’m splitting with my ex and we co-own properties. So I’m stuck in an unfortunate situation where I’m forced to refinance now.

I’m getting a rather steep interest rate of 7.62% because it’s an investment property.

Doing some math using an early payoff calculator it looks like I can save quite a substantial amount off of my amortized interest by performing extra payments to the principal.

By increasing my payments by 25%, I can save an amortized 2.6% off of my APY or increasing the payments by 34% I can save 2.9% for an adjusted rate of 5.0% or 4.7% respectively. This also has the side benefit of reducing my mortgage from 30 years to 15 years. Anything beyond this causes significantly diminishing returns.

There are no extra payment penalties and these added payments will not cause a hardship to me.

Just wanted to run this by y’all. Does this make sense? Is there anything I’m missing here?

Thanks!

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MikeWPhilly t1_iyeyt9m wrote

Extra payment aways have a big benefit. Take any 30 year mortgage calculator. If you add just 1 full payment a year (the full cost + escrow payment) you tend to end up with a mortgage that is about 8 years shorter. It’s not necessarily new. What is big though is the total interest financed over the life. Massive difference because of how high that has gotten.

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drouo t1_iyf0tj7 wrote

Any possibility to refinance a non investment property and roll in some of the investment debt?

I had a bank call me a couple years ago wanting to refinance my investment property before they realized it was an investment property and we were able to switch gears and refinance My primary and pay off the investment mortgage and roll it all into my main mortgage and it wasn't a cash out somehow magically...

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listur65 t1_iyf3x3t wrote

Replying to MikeWPhilly (#830,358)

You are not wrong. Just want to point out that it varies on the interest of the loan. An extra payment per year on a 30-year loan at 9% gives you 8 years off, but an extra payment on a 4% loan gives you 4 years off.

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