Author Topic: Is it worth it to refinance?  (Read 1983 times)

green daisy

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Is it worth it to refinance?
« on: February 15, 2016, 06:11:54 PM »
I'm trying to determine if it's worth it for us to refinance.  I've shopped around for rates and have gotten a written quote from a lender.  We live in a HCOL area, so the amounts seem face-punch worthy, but really are not. 

Current Loan - 15 year fixed at 3.875%
Original Amount - $220,000
Amount Remaining - $202,000
Payment (Principal and Interest) - $1613 (we pay $2000)
We are 1 year into the loan and are scheduled to pay it off in 10 years and 5 months from now.

New Loan - 15 year fixed at 2.875%
Loan Amount - $209,000  (we would add closing costs and the up front escrow amount for property taxes..we have to escrow if we want this rate)
Payment (Principal and Interest) - $1430 (we would continue to pay $2000)
We would pay off the loan in 10 years and a half a month. 

Rates are lower for a 15 yr fixed then they are for a 10 yr fixed, so it's better to take the 15 year loan and pay it off early then to do a 10 year loan.  We could liquidate some of our brokerage account to cover closing costs but I'd rather not since stocks are down and the rate is so low. 

Basically, it would save us $10k in the long run.  What do you think?  Is it worth it?  Also, I understand there is much heated debate regarding paying off a mortgage early vs investing, but we are comfortable with paying off the mortgage in 10 years and we are maxing 401Ks and IRAs for both of us.  Thank you in advance for any advice.
« Last Edit: February 15, 2016, 06:17:28 PM by green daisy »

MDM

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Re: Is it worth it to refinance?
« Reply #1 on: February 15, 2016, 06:38:17 PM »
"How long will you stay in the house?" is always a consideration when looking at closing costs vs. a lower rate, so...how sure are you that you will stay for the 10 years?

If you will stay there, then the lower interest rate seems a fine idea.

green daisy

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Re: Is it worth it to refinance?
« Reply #2 on: February 15, 2016, 06:40:56 PM »
MDM - We plan to stay in the house for 15 more years. 

Another Reader

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Re: Is it worth it to refinance?
« Reply #3 on: February 15, 2016, 07:30:00 PM »
I would refinance, but I would not pre-pay the mortgage.  I would invest instead.  I'm at 3.125 percent on a 30 year fixed, and I am paying off higher rate rental mortgages and investing instead of pre-paying my mortgage.

PhysicianOnFIRE

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Re: Is it worth it to refinance?
« Reply #4 on: February 15, 2016, 08:31:44 PM »
A rule of thumb I've been told is that for a 1% difference, it's generally worthwhile.  Looks like you'll have exactly that.  Try to keep closing costs to a minimum and it should be a good move, as long as you stay in the home as long as you intend.