Posted by MarkB_MI on February 18, 2010 at 17:58:58 from (166.203.123.128):
We have a couple of rental properties and we've been prepaying the mortgages on them so hopefully we outlive the mortgages. We got a letter this week from CitiMortage, who holds the mortgages, offering to give us a "great" deal on refinancing.
One offer they made was to refinance at a lower interest rate for 18 years. Our payment would go up by 60 bucks, but we would pay off the mortgage about five years earlier--they said. My wife was all ready to jump on it, but I sat down and ran through the numbers with her. It turns out that CitiMortgage had made a little fib. We don't have 23 years left to pay on the mortgage; actually it's 17 and a half!. (Although we had 23 years left on the ORIGINAL term, we've pre-paid five years worth of principal.) By refinancing, our payment would go up AND it would take an extra six months to pay off the mortgage!
I wonder how many people fall for CitiMortgage's little scam? I'll bet they have a program that cranks through their loans looking for folks who've made substantial prepayments.
Always crunch the numbers! One of the best tools you can have is a book of amortization tables. I can easily crunch the numbers using a spreadsheet, but there's nothing like having the numbers laid out in the tables of the book.
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