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Old 08-27-2008, 08:19 PM   #1
cougjunkie
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Default Would you do this?

I am working on a refi right now for a client, they have a very small home in rural Utah, the appraised value was 103,000. They currently owe 95,000.00. They plan on living in this home for at least 10-15 more years if not longer. So this is their long term plan for now.

If they refinance I can drop their rate 7/8th of a percent (6.875% down to 6%) however because of the small loan amount it will only change their payment about $35 a month. I ran an amortization schedule and if they pay the $35 extra per month towards their mortgage instead of paying it off in 360 months they will pay it off in 308. Also after 5 years depending on appraised value they will be able to drop the mortgage insurance on the loan, which will be another $44 a month. If they apply $79 a month towards their mortgage after 5 years they will pay of their house in 264 months.

All the borrower can see is the measly $30 savings (eventhough it is about 5% of his payment) and not the long term benefits, now on a loan amount this size I dont make jack so I dont really care if he does it or not and maybe I have my mortgage goggles on but does this make sense to do for anyone else?

*Closing costs will be about $2000 total. So his loan amount does go up as we will roll it in, but that is including in the amortization schedule.

Can someone move this to the right category, I wasnt paying attention when I posted it.
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Last edited by cougjunkie; 08-27-2008 at 08:29 PM.
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Old 08-27-2008, 08:21 PM   #2
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Quote:
Originally Posted by cougjunkie View Post
I am working on a refi right now for a client, they have a very small home in rural Utah, the appraised value was 103,000. They currently owe 95,000.00. They plan on living in this home for at least 10-15 more years if not longer. So this is their long term plan for now.

If they refinance I can drop their rate 7/8th of a percent (6.875% down to 6%) however because of the small loan amount it will only change their payment about $35 a month. I ran an amortization schedule and if they pay the $35 extra per month towards their mortgage instead of paying it off in 360 months they will pay it off in 308. Also after 5 years depending on appraised value they will be able to drop the mortgage insurance on the loan, which will be another $44 a month. If they apply $79 a month towards their mortgage after 5 years they will pay of their house in 264 months.

All the borrower can see is the measly $30 savings (eventhough it is about 5% of his payment) and not the long term benefits, now on a loan amount this size I dont make jack so I dont really care if he does it or not and maybe I have my mortgage goggles on but does this make sense to do for anyone else?

*Closing costs will be about $2000 total. So his loan amount does go up as we will roll it in, but that is including in the amortization schedule.
I would not do this, but I also didnt read past the first sentence, where you said the home was in rural Utah.
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