Should I Refinance Or Pay Extra On My Mortgage?
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- čas přidán 30. 06. 2022
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Today is my first day of being debt free! Yea! 60 years old & finally! Hardly any savings but out of debt! Feels great!
Congratulations 🎊👏🏾💐🥳
That’s amazing!
Congrats!
Congrats. Now just find a side hustle to make some extra money
Congratulations 👏🏾👏🏾👏🏾
I got a mortgage for 30 yrs. Made extra payments as I could. Paid it off in 19 yrs.
Me too I did it in 17 congratulations
Would you recommend this option?
Same here, I had an issue where I was off work for a period, I could still make the 30 year payment but would struggle to make a 15 year payment, I think having a 30 year payment saved my home. Later, able to pay off early.
@@eckankar7756 Very good plan because it keeps stress at bay.
@azteca6695 @kribbeck8547.......I have been paying extra like a madman.....I bought the house 9 years ago this month, and if I keep at this pace, I'll have it paid off in 4 years, turning my 30 year into a 13 year.
I think always get a 30 year and treat it as a 10-15. Just in case life gets hard and you need to make the smaller payment.
Thats exactly what I did with my car loan. I got a 60 month at 1.79% but paying it off in 36 months. But its nice to know if an emergency happens I can cover the lower payment if needed
That is amazing advise! Life happens to us all as we travel through. 30 years is also good if you are like me and buy and sell investment property. I'm interested in the lowest note to make income and build equity for resale.
This is exactly what ima do. And always always on your first payment. Pay your amount, then pay again. That a way when you start paying your loan it hits the principal instead of the interest rate. People have paid off their homes in half the time doing this
Jeff actually knocked it outta the park in hindsight with interest rates.
I feel like getting a 30 year is smarter than a 15 at the same rate. With a 30 year your payments are less but you can make additional payments. You can always pay it off quicker with additional payments. If something happens and money is tight it will be easier to pay the minimum for a 30 year than a 15 year
This makes sense to me. The only thing I would advise I’m this situation is to be diligent in paying it off in 15 and only pay the minimum in true emergency situations!
@@Aggie4life77 yea the person would need to be consistent. I just like more flexibility of being safe and also being able to pay it down sooner
Only thing is alot of people get lazy and get tired of paying extra and stay paying the minimum
@@Snacks1991 You have to be religious about it.
It's less common but there can be prepayment penalties. Be careful with that
Ramsey is spot on! All my co workers call me cheap or tight because I don’t spend a lot money. I’m thinking in future to get out of the hamster wheel
Dont tell your co-workers about your finances. Just repeat wealth building advice from good mentors like the Ramsey Solutions.. you never know when what you say might make a difference in someone else's life
Your coworkers will be working after you’re done working.
@@KC-dr3cg when building wealth dave is not the best, its just boomer advice
Mine did too! BUT you should have seen their faces and heard their comments when I told them I was accepting an early retirement severance package at age 40 from our corporation! Suddenly they all had a profound sadness and envy as realization set in that I wasn’t the crazy one all these years… it was PRICELESS to witness. Keep it up and enjoy your successes!
Refinance requires closing costs. Thats extra thousands that could have went to the principal
exactly
That could have “gone” to principal
Throw everything extra you can at the principal and you can possibly pay it off in 10 years
Perfect example of why we need to have basic life finances classes in high school. I cannot even believe people would not understand the concept to pay extra versus refinancing to a 3% higher rate.
You dont even need "basic life finance" classes in this case. Its just basic math, which is already being taught.
But we definitely do need to start teaching people finance. But we all know why that's not happening.
My Father taught me this 35 years ago. He was only a High School grad. We today unfortunately lack simple common sense and are being dumb ed down daily. Dave is spot on.
After buying my first home(30yr.)in 93 I began getting offers from the banks for them to arrange one extra month payment each year toward principal for a fee of $600.
It was laughable to me and I wondered how many people fell for that when all you had to do was just pay extra to principal which I did monthly.
I was getting these offers 3-4 times a year for over three years. Each time the fee kept dropping until no more.
Agree 100%
The smart people just don’t speak as much now. They don’t need help anyway.
We live in a world where people think men can become women and women become men, and that economic growth can be achieved through more taxation 😆
Common sense is not that common anymore.
@@han1218 what women can become men, and vice versa?
I'm so happy not sure how many years I did it but paid off my house!! DEBT FREE!!
but what does your savings and retirement account look like? debt free and broke isn't a win.
Congratulations..!!
@@jeffflowers729 how do you know he/she is broke? You're just assuming 🙄
@@Stoneface_ didn’t say they were. Asked in fact
@@jeffflowers729......I have been paying extra like a madman.....I bought the house 9 years ago this month, and if I keep at this pace, I'll have it paid off in 4 years, turning my 30 year into a 13 year. I am making 2 or even 3 extra principal payments a month lately. I would rather be poor and have a paid off house.....I can build a bank account fast with no debt.
why do so anyway. just pay more when you want. there shouldn't be any penalty for paying it off early.
I just made a $4282 lump sum mortgage payment speeds it up 11months faster! 🤯
“100% of the people who take out a 15 year pay it off… well except for the ones who don’t”
=
“60% of the time… it works. Every time.”
Ha!
At 2.5% mortgagee rate he is better off simply investing the difference into an index fund covering the S&P or something similarly broad. This of course assumes the person is disciplined enough to do that and manage their finances well. If they aren't then yeah, they should pay off the house ASAP.
But in an inflationary environment paying off such a low rate early is actually costing you money.
Wow 2.5% sounds like a great rate, now the good 'ol days.
The guy just called in to show off 😆
I got a 2.5% rate when I signed on my home that we had yet broke ground on at the start of 2021. Granted, we got a 1% compensation due to inconvenience of the building process.
I got 1.7%
I have 1.8% for 15. I add more to the principal automatically every month and will pay it off in 14 years. I’m thinking about adding to the extra amount monthly.
It still blows my mind how many home loan seekers don’t really understand how amortized interest works.
they are clueless!!!!!!!!
People can't compute.
People come from many backgrounds of education and exposure. Change takes a leap of faith, or fear of losing what you cannot live without. Your dinner conversation is different if your parent is an attorney, artist, nurse, bartender, ..highschool dropout, alcoholic,..I admire the Ramsey Solutions personalities doing their best to be a contribution to everyone.
I wish I knew about it when I first bought my house.
Lot of VERY DUMB people getting mortgages!
Simple add any extra money and designate it principal only
Where I worked observing several thousand coworkers over twenty years it seems the ones that paid extra to principal were done with mortgage in 5-15 years and retired at age 50-62.
The coworkers that refinance are paying mortgage for 30 or more years and still working.
And they will work until they die
They fell into the trap of "I can afford that monthly payment!" and spent the rest of their money on stuff they didn't need. I can see my neighbors in a similar house to mine rolling in brand new cars, garage full of junk, and the amazon truck coming daily.
@@alinatamashevich3354 So what?
None of the wealthiest people in the world are retired
Take a lesson from that
@@15KHPCLUB why would they retire? Other people are doing the work for them
@@obi-wantpastrami8745 Ah, you're one of those huh?
I have purchased a few homes. I did take a 30 year loan but with each loan I would print out an amortization schedule using the interest rate and year length in my loan. (Some banks will give to you). I would then add additional principal payments to my monthly mortgage payments. In the remarks section of my check I would wright “Additional payment to principal’”. Doing that I probably had a 10 year mortgage the way I did it, but a lower payment if I had a bad month. I had a thrill when I took the papers down and hi lighted each month how many payments I made that month with just adding extra….but I was keeping track.
That's exactly what I'm doing with my mortgage too
I got a 30 yr mortgage in 12/2010. It's set to be paid off 12/2029. Yes I paid extra the whole time. I may pay it off in 12/2025
Do u mean 2039 ?
that is awesome congrats
@@kikim8896 no, 2029.
Setting up investments and extra principal payments on auto is the way to go. Then you forget about it and get used to the lower income because the money is already going to where it needs to be. I've got the bad habit of investing what i have left after a month of expenses so i spend more during the month. Pay yourself first!
Problem is people aren't able to afford living ANYWHERE with the ratio of income growth to home prices.
25% of of take-home pay is not realistic. Especially if you're going with 15 year option, better pay 30 or 40% of income and you're at least investing and locking in a monthly rate, rather than pay 40, 50 for rent, which will go up in the future.
Automating things helps with focus on your job better, and also your family so you're grounded and more productive, and less stressed.
I always tell my kids there are no stupid questions but it took all control I have to remain empathetic. I am glad he asked before doing it that's for sure. Best of luck!
Good Info thank you
Tack on more to the payments to save on interest, that's perfectly legal!!!
Good advice to just pay the amount of a 15 year on your 30 instead of refinancing at a higher rate.
I refinanced my old rate 4.375% to new 2.375% and has been paying extra payment since then. I was on the old rate for eight years so with the new rate I aim to finish it 10-11 years that is roughly 19 years total to payoff my mortgage if everything is going according to plans
Just get a 30 and pay double.
Sure....how many people do that ? Like 10%? Get real Jimmy/Saul
@@alinatamashevich3354 and? those who don't are still smarter for investing that into index funds. i don't believe in hassle. bigger monthly expense is a hassle. you should go on and ask how dave went bankrupt. oh yes, buying short term mortgages.
@@commonsense-og1gz I know the story, the type of loan did not cause Dave's bankruptcy. Might want to pay attention and learn how banks actually operate. Any loan can be called at ANY time to protect the banks assets
@@alinatamashevich3354 banks could call loans at any time, but they will most certainly call loans, when they don't believe you can pay before deadline.
@@commonsense-og1gz No, banks can and do call loans at any time, if they determine their assets are at risk. Banks only have duty to the owners/share holders not the borrowers.
Good advice👍🏼
Great advice!
Good information 👏👏👏👏
Great advice. Love the show and have been a Dave Ramsey follower forever. Listen to him and follow his advice!
This is such a simple question.
Who would pay more interest for a 15yr mortgage?
@@shaneaguilar2209 true!
Yeah, it's pretty much a no brainer. 2.5% interest rate suggests a lot of $$ is involved. I don't know how they got that rate other than they have or paid a lot of money up front.
What do you think would happen to prices if people lived scrupulously within their means?
This isn't rocket science. Why call in? Just pay extra.
Dave always spitting facts!!!
Savage. Dave cut him off right when he said a 15yr payment would make it become 30% of his take home pay.
That’s ok, because the extra payment is not an obligation, you pay if you can and want.
That's one of the few things I don't agree with Dave on. 25% is not realistic nowadays. Better pay 30 or 40% instead of paying 50 or 60% on rent. Especially if you go to 15 year option, which will be more per month.
@@han1218 It's absolutely realistic. What's not realistic are your expectations and desires.
@@han1218 It's definitely realistic, people just need to have more money for the down payment.
And that's with a 20% down payment
No don't refi. Just pay extra on principal.
According to Zillow, there are currently 198 homes for sale in Los Angeles county for under $300k.
I’m making extra mortgage principal payments and instead of a 30 yr mortgage my goal is to pay it off in 11.5 years. I’m aggressively paying it down as much as I can. I don’t need to refinance my mortgage because I’m doing just fine with my approach
Excellent! when did you buy the house? If you make extra payments, you save on interest, which lowers your interest rate.
I have been paying extra like a madman.....I bought the house 9 years ago this month, and if I keep at this pace, I'll have it paid off in 4 years, turning my 30 year into a 13 year.
I got a 30 year 4.375 and paid it off in 10years
If you would have got a 15/20, you would have ending paying less interest overall, especially in the beginning months, per an amortization schedule
How much more than you add to loan amount per month?
@TrueAmerrican you switched to a higher interest rate? Lol... That is a BIG fail if true. Loan officer must have been laughing all the way to the bank 😂
@@comptroller39 honestly I would put 20k into the principal every year
@@kurticeberg4566 I had no idea what I was doing in the beginning haha
In the UK a 15 year mortgage paying 25% of take home pay is not doable for first time buyers
why is that I am just curios as a US citizen Texas to be specific
Taking out ‘American Distress’ 😂
Dave thought he was done about to hang up around 1:53 🤣
Dude! Just pay extra on the mortgage and be done sooner!
Some times you have to pay penalty. Double check it with your lender before you pay your house off.
You don't make extra payments when your interest rate is 2.5%...
With my mortgage broker you can add money on to your mortgage. If you want to pay an extra $300 towards your mortgage you can just leave it that way each month and let it stay that way.
Why call a radio show for this?
People get mortgages without a clue of how they work or how to scan a amortization chart.
I had a 30 yr mortgage and paid it in 2.5 years. I'm about to close on my second home with another 30 yr note and plan to pay it in 2-3 years too. I prefer 30 bc you never know if something will happen to your income, I personally wouldn't get a 15 yr note. But I also have enough discipline to keep on track with myself otherwise.
You must have a fabulous income?
@@sabrinaboston9289 I'm a teacher and husband works at hotels. We just live on way less than we make!
Normal is fun and so is California. Corvettes and
beach bunnies and the best
Mexican food.
I'm very thankful to be at 2.6% first home we sold was at 4.6%
i love dave automatic
I know several people living in Williamson Co who are broke or in hock up to their ears keeping up with the Jones'. It's not all wealthy people in that county. There's wealthy and there's wealthy for show. Big difference.
Automatic is the way to go, but will require lots of desipline if someone never did it. Do it !!! Work at it !!!
My enjoy the 2.5% practically free money loan, pay down early or be smart with the extra money you have and invest wisely, arbitrage
It's a five minute exercise on a spreadsheet.
Just make sure that when you make those extra payments ensure that they are going toward the principle.
where else can they go?
@@webfreakz they can go to pre-payment.
Exactly
Or "escrow" etc..
@@Krysdavar they can't go to escrow. federal law requires and annual escrow analysis and any overage is sent back.
A real loan originator would of told him that's stupid and probably not do it...fiduciary relationship
If your under 40, there is no point getting a 15-year mortgage, invest your money folks, don’t sink it into a house if you are young and have the time for your money to compound
investing can be tricky, paying the house is safer than investing right now.
if you're any age, getting less than a 30-year mortgage makes no sense, due to the fact you can pay it off by how much you want.
@@commonsense-og1gz basically I’m contributing 15% to 401K and paying additionally to the house principal amount. I will be able to pay it off in 13 years instead of 30.
@@joseespada6840 "right now" everything is on super sale. not tricky at all. buy buy buy and tell me how that worked out 30 years from now.
Got to disagree with this one Dave. I have always had a 30 year mortgage and it has worked out beautifully. I currently have a 30 year mortgage at 2.75% and my payment is super low. That is what I love especially being self employed. I personally would never do a 15 year mortgage because I want the lowest price possible on a fixed rate. We can agree to disagree on this one and that is ok. Love you show!
And I dont pay extra on the loan every month. If I happen to get a bonus I do make an extra payment but hardly ever.
However, if you want to be mortgage free in less than 30 years, just put extra towards the principal. That is what the caller wanted.
Ug i’m not sure you’re disagreeing with Dave on this one.
Conrad Thompson is going to have Ric Flair call in to intimidate Dave from stomping on his business BRUTHURR! Whooo!
Hi Dave,
My house it’s paid off and I have 150k savings!
What should I do or how to invest the savings?
Thanks 🙏
Joseph Atsho
I came to this video just to hear Dave say "Re-finance"
Anyone knows if the bank will charge prepayment penalty for paying off early on a fixed interest rate?
A couple days ago, George told a caller to refinance a 30 yr into a 15 yr.
There are scenarios where that might be advantageous.
2.5%!! Why would you refi
It does not make sense to refinance if you interse would be higher.
It does not make sense to borrow money either, what is your irrelevant point today Jimster?
@@alinatamashevich3354 Sheesh. That wasn't very kind. Still, it does make sense to borrow money in many, many situations, so not sure what your point was.
@@tdaveniii Is it nice when people get evicted from their home? Sometimes the truth is not "nice". Prov.22:7
What if I'm refinancing from a 4% 30 yr to a 2%, should I go for 15 yr? Or stay at 30 yr at the 2%?
I was afraid he was going to advise refinancing to a 15 year loan. 😅
Good thing he did not 2.5 is good
He would have to be an idiot. You can pay whatever you want without changing the terms with the bank. I have a 15 year mortgage on a rental property but I put all the rent against it and will be finished in 7.5
@@georgewagner7787 that’s not why he recommends the 15 year term . ppl aren’t disciplined like u lol . so if u hold them to the 15 year payment officially they will abide by it .
@@georgewagner7787 exactly as long as you don’t have a prepayment penalty you’re good
@@amde8554 do prepayment penalties still exist? If so whoever was put in a loan with one should fire their mortgage broker.
I have 14ys left, should I refinance to 30yr. But keep pmts like a 14yr mortgage.
Since monthly pmts will be smaller, so monthly interest will be smaller as well. So more will go to principal, correct? Wouldnt this save so much more interest without paying anything extra?
I would like to know what Ramsey thinks about fixed mortage/intrest rate vs inflation
Inflation will compound where intrest rate stays locked
Dont know how inflation and home prices will evolve from current record high, but even in a mild inflationary environment would the bottom line make an argument to always be in debth ?
Not stretched to the max, but maybe 25% of income against something that overtime is likely to hold or increase value like stocks or real-estate
(For the record, im working to pay off my 15y mortage in a few years, i prefer the ease of mind that if life happens i have my home payed of and will make it financially with kust a little money if needed, but curious about the math if inflation is include)
@@user-fq7tv2lo6e I won't have mine paid off, but in a few years hopefully I can sell and then pay cash for a downsized place with the equity built up.
exactly. Dave has no clue about shorting the dollar. a fixed rate locks in the cost of todays dollar for 30 years.
This is great for me
Captain crunch kinda sounds good right now though
How the heck do you get 2.5% interest rate on your house?? You must have $$$, that's the only way.
He calls the show all the time
That somebody would even feel the need to ask a question like this shows how some people just need and want to be told exactly what to do
It sounds like he is new to all this, though. Maybe it seems obvious to him but he wants to be sure he isn’t missing anything here. Nothing wrong with assuming you don’t know everything, even if you think you might.
Financial literacy and even math literacy is low in the US. Makes for perfect debt consumers, and perfect voters for politicians that want to increase the US national debt.
I don’t mind asking questions.... keep asking. Asking questions is the first way to begin change. Yet I don’t like questions that is basically common sense. Dav is talking common sense.
The studies...where are those studies you cite?
I can't stand people who take an easy question and gotta go make it complicated
better than Dave's reply and advice.
He could do biweekly payments
Did the guy hang up lol
You missed the refinance boat. Don't worry about a 15 year mortgage keep your low interest 30 year mortgage and put your extra dollars to work else where. The 10 year treasury bonds are paying more than her mortgage rate.
Yeah my 401k is a great success.. LOL..( yes, i understand what Dave is saying) .....Hold....Hold...Hold.....
People call me cheap but I have cash so idc.
I got a 0.63% interest rate, fixed, 20 years back at the end of '20. However I am in France. Could not believe it when I got the quote (from an online bank). Now I don' t do additionnal repays, I invest them. With inflation in 10 years time, monthly payments will seem ridiculous. I wonder what Dave would say, as I do not pay it off as fast as I can, as he advocates. Thoughts?
Mathematically you are correct. But life isn’t always perfect and you could lose your job or get sick etc. That’s why you need to make sure that you have emergency fund of at LEAST six months
@@Mom_of_the_Chickies oh yes this is definetly a must-have. I have had one for longer than I can remember. Thank you anyway
Definitely invest the extra. That's crazy good.
Dave has asked the question before, would you go out and borrow X amount of money today with an interest rate of Y? If the answer is Yes then don't pay extra.
Dave would say, I gave you the information of what works now you do you, Boo.
American Distress 😂
😂😂😂 I heard that loud and clear.
SRB
.... just to ereas it / but from the big questios / nothing today
extra payment
There are no dumb questions...
That guy needs to do some reading
@@georgewagner7787 To me, it shows the level of awareness in society.... you know what I mean so I'm not going to go on about it.
There is the movie "Idiocracy".
I guess they stopped teaching simple math in school!🙄
Hey Dave, should I burn a pile of money?
Yes. He says it will give you peace of mind, or something
I HAVE A FAIRLY LUCRATIVE RETIREMENT ACCOUNT, AND I ALSO HAVE A 180-K MORTGAGE AT 2.5%. SHOULD I WITHDRAW AND PAY OFF THE LOAN OR STAY AS I AM?
Nope. Keep that mortgage.
People criticize Dave's advice because they think they are "special" and math doesn't apply to them.
You're trying to say the math is on Dave's side? The 30 year treasury bonds are paying more interest than this guys mortgage rate. Prepaying your mortgage is not the key to wealth.
@@aaront936 in this case I was talking about Dave’s advice that the mortgage should not be more than 25% of take home pay.
@@linuxsurfer2002 The national median sales price of a house is $428,700 as of Q1 this year. At current 15y rates and with 20% down (everyone's got 85k in cash right?), your total monthly payment would be about $3,192 assuming no HOA. To abide by Dave's 25% rule you would need to make, after taxes, $12,768/mo or $153,216/year. After taxes.
The national median household income is less than $80k.
Peanut Butter Capn Crunch
If you have the money both. Refinance and continue making your original payment
This caller was a genius….Simple math and some common sense would have given him the answer. This call was unnecessary….
Sometimes, you just need a professional to help you know you are ok keeping it. Sometimes Math is not my forte......so...does he mean take the monthly payment of a 30 yr mortgage and then figure out what it would be if you do it as a 15 yr payment, and subtract and then pay the difference? Wouldnt you just double the payment of a 30 yr one?
Refinance to a 15 year AND pay more.
2:18 Dave lost his patience and muted the caller. SMH