Is it the right time to refinance?

[Spondulix]

My current home loan is a 30-year fixed loan at 3.875%. The balance is $282k, and my monthly payment is $1445. I refinanced a couple years ago from 4.875%, so already made up the cost of that. I just got a refi quote through a LendingTree broker. There's a "par" rate and a "no cost" rate.

• 30 year fixed, 3.625%  Payment: $1,286. Fees: $2260, one year savings: $2,028
• 30 year fixed, 3.75%    Payment: $1,305. Fees: No cost, one year savings: $1,800
• 20 year fixed, 3.5%      Payment: $1,635. Fees: $2260
• 20 year fixed, 3.625%  Payment: $1,653 Fees: No cost

I'm normally skeptical of the lenders with the bottom rates, but they are one of Lending Tree's top-rated lenders (and local). They said they get wholesale rates. They're A+ on BBB with a mostly positive online presence. What questions should I be asking?

I definitely don't need to refi, but here's what I'm considering (I can afford any of the above options)

• Lowering monthly payment means more to put in investments (I'm on a 10 year FIRE plan as-is, so this could shorten it a little). Or am I thinking of that incorrectly?
• The money I'm saving could go towards saving for a second house (vs more equity in this one) at a time that I know I can get a low interest rate
  
• I like a 30 year because I could make an extra principal payment most months, essentially making it a 15 year or less loan (without being tied to the payments 15 or 20 year loan)
• This would be a great rate/payment to be at if we wanted to rent the house out down the road. My house would rent for probably $3k/month now. Am I thinking about that prematurely, though? I don't think we'd be in a position to do that for a few years.

Am I looking at this the right way? Or am I trying to squeeze blood from a turnip when I already have a good rate?

[SaintM]

I have seen many people refinance to a new 30-year loan with the idea that they will make extra payments to pay off in less time.  There is one reason banks agree to this--they know most people do not have the discipline to do it.  They trade a lower rate and payment for a reset 30-year term.  The monthly savings get spent elsewhere and the loan never gets paid off.

Unless you have the utmost discipline, keep what you have or refinance to the shorter term.

[Vilgan]

Can you do a 15 year mortgage? That seems to be the sweet spot right now with sub 3% interest rates for those with good credit.

[Spondulix]

I haven't considered a 15 year cause my goal hasn't been to speed pay-off the house. The payment would be $1900 or more. Income is high/steady now but it may not be in the future, which is why the extra payments are appealing as an option (but not a necessity). My approach has been to power stash when we can, and have pretty minimal expenses for the times we can't.

If I look at the math another way - the true cost of my current mortgage from today (if I make no more extra principal payments) is 451,975. The true cost of the new mortgage (option 1) would be 458,282. That's only a difference of $6k. Looking at the amortization schedule, the first couple years of the new loan have an interest rate of about $800/month. So, I'd only have to make an additional principal payment 8 times before I'm on par with the other loan (very do-able - on these good months, I might make 2 additional principal payments). I could see if I was 10 years into a 30 year loan, refinancing to another 30 year could be costly in the long run, but I'm only 3 years in (and 1.5 years ahead of that in principal payments).