Recommendations for Possible Refi to 15-Year Mortgage

[megan1104]

Hi everyone,

I was curious if the MMM crowd has recommendations on the best companies to consider for refinancing a mortgage from a fixed 30-year to a 15-year version. My wife and I are not FI, but want to get there ASAP. The biggest financial albatross we have is our mortgage. We've started ramping up how aggressively we are paying our current mortgage down but want to run the numbers if it's better just to refi to a 15 year. Here's some info:

Original 30-yr mortgage principal: $415,000
Start date of mortgage: July 2015
Current principal: $374,000
Current interest rate on 30-year: 3.875%
Current value of home: $900,000

We have started making an additional $1000 payments on the principal every month. If we hold on that, we would pay off the mortgage in about 13.5 years or 2032. I would like to be able to run the numbers to see if it makes sense to add another 1.5 years back onto the mortgage and pay for closing costs. If possible, I don't want to pay for services I don't need. Are there online companies that can help with this process that don't involve loan brokers taking a commission and/or tipping the scales toward products that favor them? If so, which are the best?

I realize that I dropped a lot of info and questions in here, but I'm basically looking for recommendations for good mortgage companies -- online or otherwise. I'll take any additional advice if someone has it about the bigger strategy given our situation!

Thanks!

[nereo]

Why do you see a fixed 30y mortgage at 3.875% as your "biggest financial albatross"?
I would consider that a great wealth-building tool. 

I'm also confused about whether this is your primary residence or a rental property (as it's posted in the Real Estate and Landlording sub-forum).  If its the latter this is one of the better rates I've ever seen.

Some more information would be helpful, like what (if any) tax-advantaged space do you have and what your current income and assets are outside of this property.

See Investment Order for some perspective as to why I asked about tax-advantaged space.

[ysette9]

Perhaps check out some of the threads on the forums about all of the reasons for not paying off your mortgage early so you can get a more nuanced appreciation of what it means to carry that debt and/or pay it off. Here is one: https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/50/

At a rate that low I agree, I wouldn’t consider this an albatross. Historically you have always been better off over 30-year timeframes investing in the stock market versus paying off a debt at that rate. Contrary to popular opinion, you do not need to be mortgage-free to retire. There may be other considerations such as lowering your needed income for ACA subsidies, and that is fine, but just go into it with open eyes.

If you really want to get rid of the mortgage early regardless, I see no reason to refi. Just stick extra on each month on a 15-year amortization rate and be done with it. You never know when a job loss or other life change may result in you being appreciative of the lower required monthly payment for flexibility.

Your other option, which many would argue is the best, is to not pay any extra at all, but funnel all of that money into an investment account. When the balance reaches the mortgage balance then pay it off in one fell swoop. That way you can lay it off early, reap the benefits of being invested in the stock market, and not carry the downside risk of sticking a bunch of cash in a non-liquid asset that could be foreclosed on any time from now until the day you pay it off entirely.

[August26th]

No need to refinance and pay extra fees. You have a great interest rate already... if you are certain you want to pay it off early, keep funneling the $1,000 per month and you will accomplish the same thing on your own with no need to jump through the refinance hoops and costs.

[Rick Imby]

The only possible benefit to refi is to get a lower interest rate.  At this time that is not likely---however that could change soon.  If you are pursuing Mustachianism, my thought would be to sell your mansion and live frugally. 

Good luck