Refinance a Good Idea for us?

[Spiffster]

We are 6 years into a 30 year 3.75% mortgage. For a while we were paying extra towards principal and what started out as a $232,000 loan is now down to $179,000. Now we just pay the regular payments and extra money goes towards investments.

I am looking at rates on a 15 year mortgage and bankrate.com is showing rates as low as 2.5% (2.559% APR). Our credit scores are around 800.

A few questions.

1. Would a refinance be a good idea? Is it worth the headaches. At 2.559% we would save $2130 a year!
2. Can we really get rates that low? Or are those just teasers that nobody will qualify for?
3. Should we take the opportunity to take out an extra $15k for renovations?

Thanks.

[sv2007]

1. I would refi; if you can get that rate, it'll be a better deal no matter how you look at it.
2. Maybe; sometimes rates are regional. Call around
3. Sure why not, just a while ago people are talking about 3% 7-yr CD, i.e. you can make money pretty safe if you take out money.

[snafu]

Are there fees associated with this re-fi? It's likely worth the time to negotiate a deal. Have you met with Mortgage Officer at a Credit Union? They have a profit share program.

As I see it, it is one more diversification on your road to financial freedom. These interest rates are particularly low and Ms Yellin has made it clear she's determined to raise rates as soon as these bumps like Brexit smooth out. Psychologically, having no mortgage is empowering. Whatever sum you'd been paying is merely redirected to the investment of choice. There are no deep breaths needed when the equity market does it's occasional dives.

[Jluke]

my usual reply, what does your amortization schedule(s) show?

With extra payments how far ahead did you get on the 30-year mortgage and when is it expected to be paid off?

I would guess you might have 22-23 years left... so automatically going to a 15-year mortgage it is paid off 7-8 years earlier.

* using 179k at 2.5 for 15 years.
** using 194k at 2.5 for 15 years with 15k renovation.

Current payment for 30-year (1074? + TI) vs. payment for 15-year (1194* + TI) vs 15-year with 15k for renovations (1294** + TI).

Interest total paid on current mortgage for the 30-year life (pushing 150k w/o extra payments) vs interest on the 15-year ($35840*) plus closing costs for re-fi vs 15 year w/renovation (38842**) plus closing costs. how much saved 15 vs 30? I'll guess thus far you've paid around 40k in interest. So 150k-(40k+35840) or 150k-(40k+38842)... so you'll save around 70k when closing costs are factored in.

Now, If you paid the 1194/month or 1294/month for the remainder of your 30-year where does that put you?

Have you considered a Home Equity Loan or Line of Credit (big debate thread on that and I do not remember if one is better than the other) for the renovations?

Lots of math to do and hopefully you'll find something that meets your needs.

Hope that helps.

[Spiffster]

Thanks a lot for the feedback. I think its worth taking a closer look and running the numbers. I will report back with details once I have some solid quotes on the table.