Question: I was SHOCKED!!! Shocked and upset! I have been paying a little over > $600.00 a month for my house payment ( including property tax and > insurance), and I have only reduced my principal by $464.00 in 1997!!! > I paid $4,122.00 in interest. I knew that interest was a killer, but > when I saw it in black and white, I wanted to cry. Literally. > I am downloading an amortization shareware program as I type this, but > I would sure appreciate any suggestions or comments that you folks > might offer. I am paying 8.125% interest……should I try to > refinance?
Answer: You wouldn’t have cried if you’d gotten an amortization schedule beforehand. Your lender could have printed one out for you, or any finance software like MS Money or Quicken would have given you one once you plugged in the numbers. Interest *always* represents the lion’s share of mortgage payments in the 1st few years. Yes, but only if you can get the rate lowered by at least 1.5 points, AND you plan to stay in the house long enough to overcome the new closing costs. (Refinancing is simply another mortgage, so you’ll have to sign a bunch of papers & pay a bunch of fees all over again.) If you do refinance, try for a shorter term (15 or 20 yrs.). The payments will be higher but the difference is all principal.
If you decide to keep the current mortgage, start making additional principal payments each month — as much as you can afford.
Final bit of advice: Buy stock in your mortgage lender, and take advantage of all the ignorant schmucks who don’t follow this advice. ;-
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