From: Andy Hill 
Newsgroups: misc.consumers.house
Subject: Re: A question about mortgage principal and interest
Date: Fri, 01 Jul 2005 19:17:46 GMT

sffleague@yahoo.com wrote:
>I've been reading so much about mortgage refinancing that I think I'm
>confusing myself.  We currently have a 30-year mortgage at 6.375% on a
>house that we've only been in for a year.  The monthly PITI is about
>$1100.  We've found that we can afford pay an extra $300 of principal
>each month, so the total payment is $1400.
>
>Now I'm finding that I can refinance to a "no cost" loan at 5.5% on a
>15-year ($1330 PITI) or 5.875% on a 30-year ($1029 PITI).
>
>We're in our early 30's, no children, no debt aside from the house.
>But we also really can't say how long we'll be in the home.  Almost
>definitely not for the life of the loan, probably not more than 5
>years.
>
>I know that, at the very least, we should do one of the no-cost
>refinancings and get the instant savings.  But here's what I'm sure is
>the dumb question-- according to the amortization calendar, I currently
>pay down about $440 of principal each month (when including the extra
>$300 that I pay on top), whereas if I had the 15 year no-cost refinance
>loan at 5.5%, I'd be paying down about $240 in principal each month to
>start with.  It just seems like you'd want to be paying as much
>principal as possible, which is what I'd be doing with the 30-year
>loan.  What am I missing here?
>
Something's wrong with your "if I had the 15 year no-cost refinance loan at
5.5%, I'd be paying down about $240 in principal each month to start with".

Your PITI numbers for the new loans imply a principal balance of roughly 129250.
On a 15 year 5.5% mortgage, that starts paying down principal at 464 a month
(which jibes with what you're paying off in principal now, since you're
currently paying off your original loan at about a 16 year rate).