Author Topic: Refi to 15 year with 25 years remaining on current mortgage?  (Read 329 times)

onemorebike

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Refi to 15 year with 25 years remaining on current mortgage?
« on: October 26, 2020, 03:39:55 PM »
Currently shopping around for 15 year loans and wondering if a refi makes more sense than just putting the additional toward principal each month. Wondering what the expert mustaches think. Background:

Remaining mortgage $154,000
at year 25 of a 30 rate of 3.5%
Monthly payment with PITI: $1256

Being offered 2.25% for .95 points which increases loan to $161,000 with escrow but shortens total years by 10 and means I pay ~$47,000 less in interest throughout the life of the loan. Monthly payment would be ~$1510.

Downside is there is less liquidity but honestly a $250 dollar a month increase isn't too hard on our bottom line. My gut tells me that it is worth it and we should sign on the dotted line but I'm waiting for one of you full grown mustaches to tell me how I might mimic this 15 year without the $4,000 refi expense and similar long term savings.

Anyone have insight?

-onemorebike

slappy

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Re: Refi to 15 year with 25 years remaining on current mortgage?
« Reply #1 on: October 26, 2020, 04:01:42 PM »
Those are very close to my numbers and we just just refinanced. Our rate was a bit higher, but still under 3% so I'm happy with it. We only paid $1300 in closing costs. We were able to get the appraisal waived and I shopped around for a closing company. We also didn't pay points.

the_fixer

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Re: Refi to 15 year with 25 years remaining on current mortgage?
« Reply #2 on: October 27, 2020, 09:21:40 AM »
I have a 15 now and with the current interest rates I am looking at going to a 30 as a way to shield us from unknown circumstances, risk and pay off the house earlier. Our payment would go from $1600 a month to about $800 but we can still pay @ the 15 year rate and it will be paid off at the same time but if we need the lower payment for any reason we can make the lower payment.

Instead of paying the extra to the bank each month we will invest the money and hopefully it will grow at a rate faster than the mortgage rate (hard not to at current rates) and when we decide to pay it off we can do so as a lump sum from our investments or if we get in a tight spot we can always pay the mortgage from the investment account.

I see the biggest risk of a mortgage as the time between the day you take it out and the day you pay it off with the level of risk going up more as you get closer to the payoff. In my mind it is better to either owe a bunch or pay it off, I will use this method to keep my money available and when I FIRE will pay the house off to remove the risky period between.

But at the end of the day I am just some rando on the interwebs so reason through it for yourself and make a decision based on the outcome of your process.

tweezers

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Re: Refi to 15 year with 25 years remaining on current mortgage?
« Reply #3 on: October 27, 2020, 10:06:11 AM »
About a million years ago I asked the forum for help with the math behind refinancing to a 15 year vs staying with a 30 year and investing the difference.  A user shared an excel spreadsheet, which is still available for download in the thread below.  It was super helpful...we've refi'd twice since then* and 30-year because the predicted return from investing the payment difference between a 15 and 30 year was always significantly higher. 

*We just refinanced for a 30-year conventional at 2.5% with no points.

https://forum.mrmoneymustache.com/ask-a-mustachian/math-help-refi-to-15-yr-mortgage-vs-investing/msg424133/#msg424133