Could someone please help me to figure out whether or not I should refinance?

[SGP20162016]

Hi everyone. My husband and I have been in our house for a little over 2 years. We've paid a good chunk of it off. We received a $75,000 inheritance that we put toward it and we are also putting about $800 toward the principal.

The home is worth $360,000.
Our current mortgage is a 30 year mortgage at 4.85% and we owe $171,000. Like I said earlier, we put an additional $800 toward it each month and we also put approximately $15,000 toward it in a lump sum each year (my husband and I have some side hustles).


I could refiance to a 3.25%, but it would cost approximately $3,600 to do so. It would lower my monthly payment enough that I would be able to throw $1,100 toward the principal each month (instead of the current $800).

I would most likely roll the $3,600 into the mortgage and not pay it in case. At the moment, we have every dollar allotted for either our retirement funds, monthly budget/expenses and various sinking funds (car fund, house repair fund, Christmas fund, etc.)

We are debt free except for the house.

Would someone be able to help me figure out if it is worth it to refinance if I have to roll the additional $3,600 into the total of the mortgage?

Thank you!

[kork13]

Yes, definitely do the refi, it'll pay for itself in interest savings in just 16 months! (Save 1.6% of interest on $171k, $228/mo savings, ~16 months payoff).

I assume you're looking at doing a refi to another 30 yr mortgage? I'd strongly suggest doing a 15yr mortgage, or even shorter term than that. Yes, The minimum payment will be higher, but you're already putting a huge amount extra on principle! But the big benefit of a shorter-term mortgage is even lower interest rates, and greater interest savings. Since you're already hammering the principle, formalize that payment to get a lower-interest loan.

[SGP20162016]

I'm so sorry - I forgot to mention that the refinance will be a 15 year!

[Bluebird]

I would do the refi. I’ve done something similar. I was able to pay off smaller mortgages on two rental properties and roll it into a third rental with a LOC instead of a mortgage, which gave me even more flexibility.

[SGP20162016]

Thank you. The fact that I would have to pay $3,600 was eating at me, but I guess it makes sense if I am going to make it up with a lower interest rate. I appreciate your prompt reply!

[Bluebird]

You should be able to write off the loan fees on your taxes. Consult your accountant.

[SGP20162016]

Excellent point..thank you!

[riverwed070707]

I agree do the refi, but I would also shop lenders. I closed Friday on a primary refi at 2.75% and my fees were only $1,100. Your lender seems high. Mine is a local CU so probably wouldn't do you any good, but I would definitely shop around