Originally posted by: dullard
Originally posted by: ironwing
That's what we're looking at. We have ten years to go so we're only looking at a ten year, no cash out refi. The problem is that not many banks do ten year notes. Plus our current 15 yr is at 5.125 so the rate has to be below roughly 4.5 to make it worth the closing costs for most loans.
I never understand the desire for these odd term-length loans.
1) Determine how much you can afford to pay a month.
2) Find the best loan rates that you can (include interest rate, closing costs, and any pre-payment costs in this analysis).
3) If that loan has monthly payments that you can afford (see #1), then take the loan regardless of the term-length of the loan.
4) If you want to make a 30-year loan be paid faster, then make extra monthly principle payments.
For example, suppose you can afford $1200 a month in payments. Suppose you owe $100k and you want it to be a 10 year loan. Suppose the best loan you could find was a 20-year loan at 4.5% interest, meaning $633 monthly payments. Then, pay $1036 a month towards that loan and you now have a 4.5% interest 10-year loan.
You can always make a loan term shorter (assuming you didn't get a loan with a massive prepayment penalty). This gives you the flexibility to make the loan length whatever you want while still getting the best loan interest rates and fees. Also, you aren't locked into a $1036/month 10-year loan. If you run into financial trouble you can always drop back to $633 a month for a while.