Refinancing at today’s low rates might make good financial sense, but many borrowers can save even more by keeping their loan and simply adding a little extra to each of their future monthly payments.
Q-I have an older loan with a $30,500 balance and about 10 years left to pay on it. My monthly payments for principal and interest are $365 and my interest rate is 7.5 percent.
I would like to have the loan paid off when I retire in seven years, but refinancing doesn’t make sense because my rate would be about the same and I would have to pay about $1,200 in points and fees to get the new loan. Even if I refinanced, I would have to settle for a 15-year loan because the lenders I have talked to won’t give me a seven-year mortgage. What can I do?
A-The simplest and easiest answer is to keep your current loan but add a little extra each month toward your principal to pay the loan off faster.
You’re in the same boat that many borrowers are in: The rate that you’re paying now is so low that you can’t really justify spending lots of money to refinance, yet you want to pay the loan off faster so you can own your home free and clear much sooner than your current repayment schedule would allow.
You would have to add about $103 to each of your future monthly payments to pay your loan off in seven years instead of 10 years from now. By adding $103 a month, you would meet your goal of having your mortgage paid off by the time you retire and avoid all the cost and hassle of refinancing. As an added bonus, trimming three full years off your current loan-repayment schedule would save you about $4,000 in future finance charges.
Q-I am considering investing in a new business that would help homeowners who are behind on their mortgage payments. Do you have any information about the number of people who are delinquent on their loans?
A-According to the latest survey by the Mortgage Bankers Association, 4.39 percent of the nation’s homeowners-or 2,063,000 of the estimated 47,000,000 borrowers in the United States-are at least 30 days behind on their payments. That’s up by 47,000 from earlier in the year, but down sharply from the 2,232,500 borrowers who were behind a year ago.
Economists don’t worry much about loans that are just 30 days late, because many borrowers simply forget to make their payment on time and then quickly bring their loan back up to date.
More worrisome, though, is that the number of people who are at least 90 days late and facing foreclosure has slowly but steadily been on the rise. About 479,400 borrowers across the country are in that unfortunate situation, as a big jump in foreclosures in the recession-battered West and a slight rise in the Northeast are offsetting solid improvements in the South and Midwest.
Q-I want to get a home-alarm system. Although there are many installers in the phone book and I want to get several bids on the job, I don’t want total strangers walking through my house and I don’t want to pick a company that will provide crummy service. How can I find a good installer?
A-In many ways, looking for a home-alarm company is like looking for a good contractor. Ask your neighbors, relatives and friends.
Also ask your local police department or other law-enforcement agencies. Check out each installer’s record with the state agency that’s responsible for issuing licenses. In most states, that’s the department of consumer affairs, which you’ll find under the “State Government Offices” heading in the white pages of your phone book.
Getting at least three bids on the job is important because many firms charge extra for protection that is included in other companies’ basic package.
