I'm 22 years old and I'm looking into buying a $95,000 house. After a 20% down payment the mortgage loan would be for $76,000. I wanted to get a 15 year fixed rate mortgage so I can pay it off sooner and pay less interest, but I don't think I can comfortably afford it, it would be around $700 per month including the home insurance and property taxes in the mortgage and total interest over the loan would be about $19,000. On the other hand if I got a 30 year fixed rate mortgage it would be about $533 per month including the home insurance and property taxes and total interest over the loan would be about $58,000.
Process:
1. I was thinking I could get the 30 year fixed rate and keep it for 5 years and pay $533 per month which would bring the mortgage down to $53,560.
2. After the 5 years I would refinance to a 15 year on the $53,560 loan which would be about $535 per month. (Assuming rates don't jump to high in the next 5 years)
Results:
1. I would only have to pay around $25,000 in interest instead of $58,000 interest on a 30 year fixed loan.
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2. My payments would keep at a steady $530-$540ish per month throughout both mortgage.
3. I get the house paid off in 20 years instead of 30 years.
Ideally is this realistic? I have never bought a house or refinanced but if you have any history or advice on this it is greatly appreciated. Also what's the min/max I'd have to pay to refinance approximately? Thanks.
Read more: When is a good time to refinance and when is a good time NOT to refinance?
