Refinancing with little benefit other than making monthly payment more flexible

[stacyknutson]

I expect to FIRE within the next two months, and my spouse plans to cut back to part time soon after that (and then he will fully FIRE within 1-3 years). We are planning to re-do our home equity line (HELOC) and refinance our mortgage very soon (we talked with a banker and I plan to submit the application within the next week).

We have about 15.5 years left on our current mortgage at 3.375%. We would be refinancing with the same lender at 2.99% for 30 years. We plan to continue to pay what we pay now on it each month so that it is still paid in about 15.5 years. The closing costs will be around $2500 and we will save about $185 per year by refinancing (so, obviously not much savings there).

The main reason we would like to refinance is that it will allow us to be more flexible with our monthly mortgage payment (the minimum monthly principal and interest payment will be about $739/month with the refinance instead of $1188/month). So if for some reason we run into any hiccups in our FIRE plan (for example, if our income drops a lot somehow or our expenses suddenly increase significantly), then we have more wiggle room (like an extra $5,000/year that we can divert from the mortgage to other expenses, if needed).

I am just interested to hear others' thoughts about this and whether anyone has done this before or sees any reason why this wouldn't be a good idea for us at this point. I'm not seeing any downsides to it, but since we're about to FIRE, I thought I would get some input from others who may have done this or at least looked into it before.

[Nutty]

We are in a similar situation.  13 years left on a 15 year mortgage at 5%.  Refi into a 30 year at 2.7% will cut the payments in half.  We have the option of paying off early or investing.  My thought is to FIRE in 5-10 years and sell this place anyway, so we are saving money until the 10th year (per break even calculator).  This frees up money for other projects like renovation and investment.

Are you planning on staying there forever or selling in the future?  Do you value owning the house?  Owning the house will decrease your expenses in FIRE.  We are answering these questions ourselves and have decided cash flow and renovation is good.

Best wishes

[stacyknutson]

We are planning to stay in the home for the foreseeable future. Obviously, things could always change, but right now we are happy here and don't plan to sell. I agree that owning it outright will be a benefit in the form of reduced monthly expenses.

I like your idea of freeing up money for renovation and investments. We will take that into consideration also. It might be beneficial to do the minimum monthly payment after the refinance even if we don't "need" the extra money (as long as we put the saved money to good use, like you are).

[charis]

We did something similar - had 14 years left at 4% and refi'd to 30 year at 2.75% with cash out. Total p&I/escrow payment will be only around $800/month. It's very doable even if one or both of us lose our jobs. Cash will be invested or used for remodel.

We are already increasing 529 accounts until they reach a certain point with the monthly savings, then opening a taxable account to save up to pay off the mortgage at the same 14 year point. However, we are NOT going to prepay on a monthly basis bc there is no benefit to doing that and we may decide to keep the mortgage even if we have enough saved to pay it, who knows.

[Catbert]

Once you're retired and your spouse is part-time getting a mortgage will get more difficult so...now's the time if you'll ever want to do it.  Also, would you be wrapping your HELOC into the new mortgage?  Most ( all??) HELOCs have adjustable rates and can change quickly.   If it's sizable I'd want to get it sorted out before retiring.