Author Topic: Should I refinance to a 15 year mortgage?  (Read 2445 times)

GuinnessPhish

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Should I refinance to a 15 year mortgage?
« on: May 15, 2015, 12:23:47 PM »
Currently have $462,733 mortgage at 3.75%.  Almost three years into a 30 year mortgage.

In two months, we're going to have the principal paid down to 78% of original sales price, so PMI will be removed (saving $226.20 a month).  We paid down the principal almost $35,000 since January in order to do this, and we only have about $10,000 in principal left to pay to get PMI removed, which will bring our monthly mortgage payment including PITI to around $3151 a month.


My wife just inquired with quicken loans about getting a 15 year mortgage refinance:

"We quality for a new 15 year conventional loan at 3.25%, with minimal money down and fees. We would only have to pay out of pocket $500 earnest money and the bank is willing to wave the closing fees.
Our new monthly payment, including PITI would be $4100. and no PMI."



So, $949 a month more toward the mortgage;  $11,388 a year less towards investments.






sallyanne

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Re: Should I refinance to a 15 year mortgage?
« Reply #1 on: May 15, 2015, 12:25:29 PM »
At savings of only .5% on your mortgage rate, maybe it would be worthwhile to just bump up current payments without going through a refi?

thd7t

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Re: Should I refinance to a 15 year mortgage?
« Reply #2 on: May 15, 2015, 12:33:52 PM »
Make sure that your PMI doesn't have a minimal term.  On conventional mortgages, it's usually 24 months, so you'd be good, but other types have different guidelines. 

GuinnessPhish

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Re: Should I refinance to a 15 year mortgage?
« Reply #3 on: May 15, 2015, 12:42:27 PM »
PMI term has been met....24 months, correct.

PMI will be removed with 2 more mortgage payments (plus additional principal payments).


I guess I'm mostly wondering....

I'm assuming it would be better to be throwing $11k into investments at higher return of 5 - 8%, correct?

thd7t

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Re: Should I refinance to a 15 year mortgage?
« Reply #4 on: May 15, 2015, 01:07:56 PM »
Do you have any tax protected room left for investments?

frugaliknowit

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Re: Should I refinance to a 15 year mortgage?
« Reply #5 on: May 15, 2015, 01:15:09 PM »
Echo SallyAnne.  Why are you refinancing for 0.5%?  What's the break even point?

A factor in whether to go to 15 year is your age(s). 

Personally, I'd leave it be.

iowajes

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Re: Should I refinance to a 15 year mortgage?
« Reply #6 on: May 15, 2015, 01:18:08 PM »
I wouldn't do it for such a small decrease in the interest rate.

Just pay off your current mortgage in 15 years if that is important to you.  But I'd only do that if you are already maxing 401k/403b and your IRAs. 

MDM

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Re: Should I refinance to a 15 year mortgage?
« Reply #7 on: May 15, 2015, 01:19:16 PM »
Minor point, but for this type of analysis you can ignore the "TI" portion and look only at the "PI."   Shouldn't matter either way, as the mortgage is irrelevant to TI, so TI will be constant....

Cheddar Stacker

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Re: Should I refinance to a 15 year mortgage?
« Reply #8 on: May 15, 2015, 02:29:13 PM »
How long do you plan to stay in the house?
Indecision may or may not be my problem.

GuinnessPhish

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Re: Should I refinance to a 15 year mortgage?
« Reply #9 on: May 15, 2015, 02:49:05 PM »
Do you have any tax protected room left for investments?

Well...not sure.  We both have Roth IRAs, but I am now a SAHD, so I won't be contributing to mine this year.  Wife brings home about $175k, so she is still able to contribute to hers, correct?


GuinnessPhish

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Re: Should I refinance to a 15 year mortgage?
« Reply #10 on: May 15, 2015, 02:50:33 PM »
We plan to stay in the house for many more years, ideally until it's paid off and my wife is able to FIRE.

Cheddar Stacker

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Re: Should I refinance to a 15 year mortgage?
« Reply #11 on: May 15, 2015, 02:58:38 PM »
Do you have any tax protected room left for investments?

Well...not sure.  We both have Roth IRAs, but I am now a SAHD, so I won't be contributing to mine this year.  Wife brings home about $175k, so she is still able to contribute to hers, correct?

You can both contribute to a Roth IRA as long as your combined gross is < $183K-193K. You are allowed to use her income for a spousal contribution for you. You could also do a Traditional IRA for you if you preferred that, and that's what I'd do since you're in the 25-28% bracket. She would have to go Roth unless she has no 401K, then she could do either.

We plan to stay in the house for many more years, ideally until it's paid off and my wife is able to FIRE.

Since you plan to stay there for a long time, a 30 year mortgage will come out ahead in the long-run if you invest the difference (the $950 or whatever) properly. I'd stay put with the current mortgage, get rid of the PMI, then start filling her 401K, her Roth IRA, your T. IRA, then put the rest in a taxable brokerage account.
Indecision may or may not be my problem.