How I Saved a Client $188,000.00
Posted On: April 20th, 2010 by James Posted In: Financial Health • Mortgage Programs • Mortgage Rates • Refinancing
What could you do with $188,000.00?
I was recently talking with an old client of mine who was not even considering a refinance. He is about 2.5 years into a Jumbo 30 year fixed mortgage at 6.25% and a remaining balance of $519K.
We have recently rolled out second mortgages again, that can close at the same time as a conforming first. What this means to current Jumbo mortgage borrowers is a potential huge savings. We put together a maximum conforming first mortgage of $417,000, (with no closing costs) at a rate of 5.375%, and a second mortgage home equity line of credit at 4.5%. for the remaining balance of $105k. This new mortgage structure created over $700 per month in additional cash flow.
Now if this borrower continues to commit the same payment he has already been paying, and applies this new overage to the second mortgage, he will accelerate his pay off, and shave over 5 years off his loan term which translates into over $188,000 US Dollars.
Now if this borrower decided to save the difference, he would need to exceed an average return of 3.27% in order to create EVEN MORE savings. 3.27% is the blended EFFECTIVE PERCENTAGE RATE of the new financing. This is the cost of money adjusted for tax benefits. If the savings exceeds the cost, this borrower is in an even better position to pay off the loan sooner and save even more money.
If you would like to see if you qualify to refinance OUT of your high rate Jumbo mortgage, or if you are just interested in finding out what your CURRENT “E.P.R.” EFFECTIVE PERCENTAGE RATE is on all of your debts, drop me a line and I can show you what it all costs.
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