How much will I save? 5 year fixed: 2.72% vs 1.79%

thisischris wrote: ↑ https://tools.td.com/mortgage-payment-calculator/

Nukey wrote: ↑ You haven't quite posted enough information, but a new $216,000 mortgage with a 15 year amortization and bi-weekly payments @ 2.72% would result in a payment of $672.24 bi-weekly. Total interest over a 5 year term would be $25,023.00 and the balance at the end of the term would be $153,631.80.

The same new mortgage @ 1.79% would result in a bi-weekly payment of $629.75, interest of $16,344.24 and an ending balance of $150,476.74. The interest savings is $8,678.76. The additional principal paid down is $3,155.06.

gbill2004 wrote: ↑ My penalty to make this change is around $2700, so financially I think it still makes sense over the 5 years, right?

padu2004 wrote: ↑ The savings is actually even a bit more, in the sense that there is less actual cash outlay from you if you look at the payment values posted above ($629.75) vs (672.24). If you wanted to be technical about this, you would reduce the amortization from 15 years on the new mortgage of 1.79% (keep reducing it by trial and error) until the bi-weekly payment equals the same $672.24. This way, when you're comparing ending balances and seeing which is better, you're are confident that the actual cash outlay over the 5 years from both scenarios is the same.

Most lenders allow you to "roll in/add in" penalties/fees of up to $3K, so an additional exercise you can do is add in $2.7K to the mortgage balance ($218.7K), run the calculator at 1.79% and whatever amortization you need to choose to get the SAME payment of $672.24. You will have adjusted for penalty, keeping the bi-weekly cash outlays the same, and can just directly compare ending balances (apples-to-apples).

In any event, it appears there are savings for you, but just wanted to clarify the calculation.

gbill2004 wrote: ↑ Thank you so much! This is exactly what I was looking for! So if I put the extra interest saved towards the principle on a regular basis then the balance after 5 years would be around $145,000 right?

Nukey wrote: ↑ In the example above, your payments will be lower by approximately $42 bi-weekly, so you can take that money (around $5k total) and put it toward the mortgage, if your mortgage allows increased payments. Even without doing that, you'll benefit from your balance at the end of the term being lower by around $3,200 due to more money going toward the principle vs. interest, even with the lower bi-weekly payment.

fogetmylogin wrote: ↑ Did I miss something? How much time is left on your current 5 year mortgage? If your penalty is only $2700 it doesn't sound like it's the full five years (or minus a few months). This changes your calculations in two ways. Remaining interest of course but also on the other end. If you have 2 years left for example you are very likely to get a very similar rate as now in 2 years whereas 5 years from now it is less known.

gbill2004 wrote: ↑ It's 5 months into a 5 year fixed term at 2.72%.

er34er34 wrote: ↑ Pretty sure your penalty isn't just $2700 if its a 5yr fixed.. you must be thinking it's just 3 months interest, when you'll actually be charged the interest rate differential which will pretty much negate any savings.