2013 Christmas cards!
At the end of 2013

Details of refinancing our mortgage


Playing catch up a bit after a busy and festive Christmas week. I've been wanting to share details about the refinancing of our mortgage, et voila!

The day before Thanksgiving, Chris stopped in to a local credit union to get details about the possibility of refinancing our mortgage. It's something we've been wanting to do for a while. Within an hour, Chris was sending me excited text messages about our options. At that point we had started leaning towards staying in our house, as opposed to doing something radical, but hadn't made up our minds. As we weighed all the pros of staying in our house together with the savings of a debt-reduction budget plus the savings of refinancing, it was clear that refinancing was a great option.

Here are the details comparing our first mortgage with the terms of our new, refinanced mortgage:

First mortgage:

Borrowed $180,000 in July 2009 (I had written $200,000; Chris reminded me that we put down $20,000 and only borrowed $180,000 to pay for our $200,000 house.)
30 year, fixed rate at 5.25%
Principal + interest per month: $993.97
Principal: ~$250

Refinanced mortgage:

Borrowed $172,500 in December 2013
Closing costs of $4,385 rolled into mortgage
20 year, fixed rate at 4%
Principal + interest per month: $1,045.32
    Principal: ~$470 (yaaaaaaay)

The benefits of refinancing:

+ Savings of $40/month on our monthly payment; this will vary based on yearly taxes assessed.

+ Approximately $220 additional principal paid each month.

+ Eliminated mortgage insurance (was $75/month).

+ Reduced the life of our mortgage by 5.75 years.

+ Over the life of our mortgage saving $65,000 in interest payments.

(I really had to restrain myself not to put an exclamation point after each of those benefits. Just imagine that they are there, OK?)

Our only out of pocket expense for the refinance was the $450 fee for the appraisal, which was credited back to us in the closing costs. We were so pleased to learn that the appraisal value is $242,000, which is $42,000 above what we paid in 2009! 

We opted to roll our closing cost fees into the mortgage instead of paying them out of pocket. Interest is not applied to the closing cost portion of the loan so we felt comfortable doing this to order to preserve our cash savings. After 21 payments the savings on our monthly payment will have made up for the amount borrowed for closing costs.

The $40/month savings from refinancing will come in handy as we focus on debt reduction. It's also so very satisfying to not pay mortgage insurance, to pay more principal, and to have reduced the life of our mortgage.

This is one of those things that we put off because we're busy but once we took a little bit of time to look into it ended up being easy and saving us a lot of money. So satisfying.