So I have a mortgage math question for all you mustacians out there.

My wife and I have been debating what we should do in regards to our mortgage debt; there is no right or wrong answer, just opinions… So I figured I would put some math out there and see what some of you thought.

We bought our house after the crash in in 2009 paying about $650k which was well below market, it appraised for $750k. We put down 20% so we had a loan for just over $500k for 30 years at 4.875%... Back then I thought we would never refinance, this is so cheap free money… yada yada yada…. I overpaid every month by 10% as well which would have knocked 7 years off the original loan so. The original payment was around $2700; I paid just over $3000.

Well fall of 2011 rates were even lower… we did our first refi, we did another 30 at 4%, this was just about getting a lower interest rate, we have no cash flow issues so my new payment was around $2400, however I reset the clock from 28 years to 30. I kept paying $3000.

Rates kept dropping and we wanted a liquidity backstop so in under a year we took the plunge and refi’d for the third time, this time we did both a rate and terms refi. We went from a 30 year to 20 year and our rate dropped to 3.375%. To qualify for this rate we split our loan in two a mortgage and a HELOC. The mortgage was for $417k and the HELOC had a limit of $85k we borrowed $75k, the HELOC was at 4.75%. To make this work both loans were with the same lender, however we wanted liquidity and a better rate. We immediately borrowed the additional $10k from the HELOC to pay down the new mortgage to $407k, so our total amount borrowed was still $492k ($407K mortgage/$85k HELOC). We than immediately refinanced our HELOC with another lender for a new line with a limit of $300k and a rate of 2.49%. I also had to pay down the mortgage by an additional $12k to get the appraisal in line with what the new HELOC lender needed CLTV to be. So our total mortgage balance was $391k @ 3.375% for 20 years and the HELOC balance was $85k @ 2.49% with $215k available to draw. The mortgage payment stayed within $6 of the previous mortgage payment, and we now had an additional interest only payment on the HELOC of ~$125. I continued paying the mortgage at $3000 minus whatever the HELOC monthly interest was.

So that is the long drawn out history on my mortgage to date… Based on the current path, with over payments, my mortgage will be paid off in 15 years. At some point the HELOC rate will rise above my mortgage rate at the point I will recast my mortgage and shift my current over payment, plus the recast savings currently at about $200 towards the HELOC (might put additional capital if rates sky rocket, or look at HELOC refi opportunities, but that is beyond the scope of this post as that is a big unknown, at some points rates will rise and the HELOC needs to be addressed as such). My current lender supports recasts at $250.

So the question should I refinance into a 10 year mortgage at between 2.75% to 2.875%. I will shave about 6 years off my current mortgage but my current payment will go up by about $900. I am leaning toward yes; my wife is leaning towards staying on the current path.

Doing the refi on the mortgage in a vacuum saving 6 years’ worth of payments at $2400 a month compared to adding $900 for 10 years is worth about $60k, however the payment is now higher than the $3000k I have been paying including the HELOC interest so it is about $1025 more a month and if you factor in the overpayments on the current mortgage the savings drop to about $30k. Now $30k is nothing to sneeze at over 10 years, but it ignores the interest rate risk on the HELOC which will go up and I no longer have recast ability or extra payments to through at that if rates to go up. I would be reliant on HELOC refi opportunities or additional capital sources; this is why my wife is hesitant. My argument has always been reduce the interest as much as you can as early as you can so the principal is lower in the future so even if you have to refi at crappier rates or terms the balance is reduced so much the amount you owe is so reduced it no longer matters, as the HELOC interest rate risk is there regardless but might be understated and this $30k savings is concrete. She feels it is better to stay the course and adjust strategies within the current payment structure as rates change.

Our current mortgage balance is $352k @ 3.375% with just shy 15 years 11 months of payments left I am only 15 payments into the loan, the HELOC is $85k @ 2.49% the HELOC is prime - .75%.

What would you do and why?

Thanks,

-Mister FancyPants