The Mathematics of Mortgage, Overpayment and Refinancing Decisions

October 7th, 2009 admin

With mortgage interest rates at historically low values refinancing home loans is an option currently being investigated by many here in the US. I, too, considered the same issue recently and discovered that this is not an easy decision to make. I developed a spreadsheet to figure out if this was a good idea. You can download this spreadsheet by clicking on this link (Microsoft Excel 2003). In general, the spreadsheet was also intended to show how loan repayment terms are set, how banks make money on loans, when overpaying monthly payments makes sense etc. Feel free to use the spreadsheet and improve upon it or tailor it to your situation. The rest of this article is a tutorial on how to make decisions about mortgages, how mortgages work in general, whether overpayment of the monthly payment makes sense, and what to consider when refinancing. The focus will be on the mathematical aspects of the decision making. Read the rest of this entry »

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