Yesterday I mentioned that I’ve been going through the process of renewing my mortgage. To some, this might be a daunting, boring, or loathsome task. For me, the mortgage renewal process is a time to get my nerd-on. For those not in the know, getting my nerd-on in this case implies spreadsheets. Lots of spreadsheets filled with numbers, and equations, and number filled equations.
Oh Sweet Baby Calculus, so many equations.
Anyway, I sat down and started drafting scenarios – 29 of them to be exact – based on some of the going mortgage rates that I was able to find. You might think I went overboard, but personally I felt 29 scenarios were just enough to make an appropriately informed financial decision that was right for me.
After crunching the numbers, square rooting the inverse polynomial bisector, normalizing the discriminant, and carrying the one1, I opted for a 3.89% fixed rate over 10 years. As I mentioned yesterday, I feel confident that mortgage rates are going to go up. With this in mind, a low rate secured for a longer period of time made sense for me. The alternative – taking a slightly lower rate now for a shorter period, presents the risk of having to renew at a higher rate later, potentially losing the gains I would make with the short-term low rate mortgage now.
A gamble? Perhaps, but a gamble I’m willing to take.
But what does a 3.89% 10 year fixed mortgage really mean?
Well, if my current rate were to remain in effect until my mortgage were completely paid off, I’d end up paying over $73000 in interest above and beyond what I’ve already paid. Yikes! At 3.89% I only have to pay slightly less than $60000. That’s a savings of almost $14000.
Or, in terms that speak to me – $14000 worth of wanderlusting monies2.
But the savings don’t really end there. Consider that my mortgage payment would also decrease by approximately $80 per month. Adding that up over the course of the mortgage represents $19000 in my pocket.
For those keeping track, that’s almost $33000 worth of wanderlusting monies3.
Of course, being responsible and wanting to get rid of my mortgage sooner rather than later, I’ve decided that I should instead increase my monthly payment by $804. By doing so, I end up paying the mortgage off in 14 years rather than 20. Combining the savings from paying off the mortgage faster with the overall reduction in interest means that I save almost $60000. And that, dear friends, is a lot of wanderlusting monies.
1 This is what most people forget to do. Always carry the one. Always. Unless you have to carry something else.
2 Wanderlusting monies – unlike regular monies – are the root of all fun (where fun is measured in shenanigans, adventure, adventurous shenanigans, and shenanigan filled adventures).
3 Of course, my new mortgage requires a few extra payments, so the true amount of wanderlusting monies is about $5000 less than this – $28000. Still, that amount of wanderlusting monies can make for a rather sweet adventure.
4 Actually, my new mortgage contract allows 15% top up without penalty, so I’m going to aim for that.
- Freddie Mac: 30-year fixed mortgage at new record low: 3.79% (stiel.co)
- Service With A Smile (consumedbywanderlust.wordpress.com)
- When To Refinance Your Mortgage | MortgageRefinanceRates.org (mortgagerefinancerates.org)
- Third Straight Week of Record Mortgage Loan Rates (loans.org)