Quote:
Originally Posted by Tron_fdc
I have no idea what the guy is talking about, but he's usually pretty good with me.
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What he's saying is you have 1.7%, and his crystal ball says that rate will remain the same for another year. If you "locked in" now your rate would go up a bunch.
So what he recommends you do is figure out now how much that will be going up, and start "pretending" that is what you have to pay each month. That way 1 year from now you will owe less and pay less interest.
So some random numbers here using
www.mortgage-calc.com
$200K house, 25 year amortization @ 1.7% interest - total payment is $818 per month.
$200K house, 25 year amortization @ 4.45% interst - total payment is $1117 per month.
So at the current rate of 1.7% you will be putting about $530 per month against the principal. By paying the $1117 you will be putting $829 per month against the principal.
So take advantage of your currently low rate, pretend it's higher, and work towards paying off your house quicker.