Loans question (refinancing/overpaying loans)

[1Overdrive]

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Hey guys,

So, let's say after dental school, those 4 years ended up costing me $320K, not including the interest accrual while in school. After taking into account interest during 4 years and choosing a 30 year payment plan, this ends up costing ~$2850/month. For a 15 year plan, the monthly cost is $3800. What's to stop me from just taking the 30 year plan and paying as if I was on a 15 year plan. Would ease the debt a bit I feel in case of any tough times, but what would this mean for total payment? Will I end up paying more on a 30 year plan if I paid as if it were a 15 year plan, or would it be equal to the 15 year plan?

Also for refinancing, is there a certain amount of the loan that needs to be paid off before refinancing or can loans be refinanced at any point (after the first year, of course).

Thanks and sorry if this is in the wrong forum.

 

[sjv]

Nothing is stopping you, you can do that and the total payment at the end would be less (closer to 15 year amount than 30 year).

If by refinancing you mean changing payment plans, you can change at any time.

 

[1Overdrive]

Nothing is stopping you, you can do that and the total payment at the end would be less (closer to 15 year amount than 30 year).

If by refinancing you mean changing payment plans, you can change at any time.

How much closer would that be? Like a bit more than 15 years or something like 20 years? Won't be less than 15 for sure, but how close to 15 though?

 

[sjv]

How much closer would that be? Like a bit more than 15 years or something like 20 years? Won't be less than 15 for sure, but how close to 15 though?

Depends how consistently you pay a higher amount than you owe, you would have to put it into a calculator to estimate.

 

[doc toothache]

You will have to look at an amortization table to know how much you will be saving in interest over a 30 year note, because it will depend on the amount and time frame when you pay down your principal. The only time it will be the same as a 15 year note is on day one if you pay down your principal. When in doubt, check with a CPA.

 

[Glimmer1991]

If you refinance for a 15 year instead of a 30 year, the interest rate would be better.

So, even if you pay a 30-year loan off in 15 years, you'll still pay a bit more money because you'll have accrued interest at a higher rate during those 15 years. On a $320k loan, it might be quite a bit of a difference, but I haven't run the numbers.

Here's an example from DRB, a bank that helps students refinance their grad school loans:
(Note--these numbers have a 0.25% discount that is only applied if you have auto payments.)

https://student.drbank.com/rates/

 

[Glimmer1991]

Oh, and if you're interested in learning a bit about finances, I HIGHLY recommend "I Will Teach You to be Rich" by Ramit Sethi. It's a FANTASTIC introduction, and he's a really interesting dude.

I'd also head over to the whitecoatinvestor's site (and read his book) after you get done with that and know some basics. The stuff he talks about actually applies to us.