Refinance Home Loan or Stay the Course

[Wallerstein]

Seven years ago I bought a home and financed $99,900 with a 30-year, 5.13% loan. The principal is $540/month. Total is $700/month with taxes & insurance. Now interest rates are lower and I can refinance it through my credit union at around 3% (paying refi fees of course).

Does it make more sense to refinance to a 15-year loan at 3% or just pay more each month on the current loan?

I could pay about $1000 extra a month on the current mortgage. My estimate is I would pay off the current mortgage in 5 years.

The only other high interest debt I have is $7000 remaining on an auto loan at 7%, which I could refi to 3.5% for the same remaining loan term period (2 years) saving me a couple hundred dollars in interest, or maybe even pay it off entirely using some emergency savings. 

[frugaliknowit]

1.  You need to forecast how long you will own the property.
2.  With that in mind, you need to do a break even analysis once you know the closing costs.  You can get those from the lender.

[soccerluvof4]

Yea..run the numbers and if you have the dicipline and want to pay it off sooner than thats what I would do. 3% is free money. Work it to your advantage but you gotta run all the numbers as the math doesnt lie. Some people dont mind a mortgage. I personally at any rate would get rid of as fast as I can. So hence I dont have one.

[TomTX]

Another option is a Home Equity Loan or Line of Credit.

Typically those can be done with no closing costs - the interest rate won't be quite as low, but fuckloads better than what you have now.

At my CU, 15 year term:

Refi: 2.75%, $3,400 in closing costs
HEL: 3.75%, $0 in closing costs.

Don't just sit around paying over 5%.

[Wallerstein]

@frugaliknowit/soccerluvof4: those are good points. I'll do the math and consider my options.

@TomTX: you figure if I got a HELOC on those kind of terms the finance math would work out to my advantage to pay off the car loan and then make monthly payments to the HELOC account?

[TomTX]

I would probably refi everything into a single HEL or HELOC with zero closing costs.