Posted on: 09th Aug, 2010 07:33 am
i owe 187,000 on a 30 year fixed with a 4.875% rate. i have been paying on this for only 1 year. i have an opportunity to refinance into a 15 year at 3.875%. i can afford the extra payment and believe i will be in the house at least three more years. the closing costs are $1200. is it worth it to refinance or just pay an extra $350 (the increase of moving to a 15 year) a month towards principal? thanks.
Hi MMorris,
As you're planning to stay in the property for next 3 years, I don't think it would be a good option to refinance the loan. You may not be able to offset the closing costs, in the 3 years, that you pay while closing the loan. So, in my opinion, it would be better if you could pay an extra amount towards the loan principal.
Thanks,
Jerry
As you're planning to stay in the property for next 3 years, I don't think it would be a good option to refinance the loan. You may not be able to offset the closing costs, in the 3 years, that you pay while closing the loan. So, in my opinion, it would be better if you could pay an extra amount towards the loan principal.
Thanks,
Jerry
Actually, you would be able to offset the closing cost (if $1200.00) in approximately 13 months into the new mortgage. Your best option is to refinance at 15 year term, at the 3.875%. According to my calculations, there will be a reduction in payment, which in turn will allow you to sustain your current mortgage payments at a 15 year term, and continue making the extra $350.00 payments toward the principle. It's a great situation to be in.