Re:Introducing Guesstimate, a Spreadsheet for Things That Ar...
by aj7 on Friday January 01, 2016 @01:09AM
(#10821229)
When refinancing houses, I always performed detailed analyses. With a good model, you can compare every deal offered. The key input is your expected life of the loan. You'd pay very high fees for an interest rate reduction if you really thought you'd keep a loan 30 years. But that is not very realistic.
I found, remarkably to me at the time, that at a single particular loan life, the APRs of a single lender all converged very accurately to a single interest rate. This told me two things: 1. Choosing a realistic loan life was key. 2. Many of the choices (points + fees vs. interest rate), were for most people illusory offerings to give the illusion of choice.
A few weeks back I used the tool to help a friend decide which mortgage option to take for his house. One house has a slightly lower APR than the other, but was a had a higher assistance fee.
After fiddling with it, it looked like the one with the lower assistance fee was the better option. But perhaps more important, it didn't seem like it made a big difference; perhaps around $200 after 10 years. This was a good indication that the choice didn't really matter; that it wasn't something to spend over a few hours worrying about.
http://getguesstimate.com/models/100