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Going from a 30 year 4.85 to a 15 year 3.25. We plan to stay in the house for at least 20 years. Refinance costs will be 3%.
Based on every calculation seems like it's a clear choice to do it. We will quickly make up the 7k and we have paid down principal so we avoid PMI. Our new monthly payment will only be $100 more than current.
I also calculated how much we'd save on interest if we prepaid our current and switching to the 15 year will still save 40k.
If you haven't get the closing costs at 3.125 and 3.375. You may be suprised at what you find so check it out. 3.125% may only cost .25 point more or 3.375% may get you a .5 point credit towards closing costs.
Did you compare the scenarios if you keep the current 30 year, and make extra payments towards principle? I'll bet that the total interest spent isn't much more, if any, and you wouldn't need to spend the seven grand to get the lower rate on the refi.
Plus NOBODY knows for sure that they will be in a house for 20 years. I'd say that $7K to pay down an interest rate is a chunk of change. I'd rather pay the $7K towards my house, in my pocket, instead of the mortgage broker who is collecting the points.
Did you compare the scenarios if you keep the current 30 year, and make extra payments towards principle? I'll bet that the total interest spent isn't much more, if any, and you wouldn't need to spend the seven grand to get the lower rate on the refi.
Plus NOBODY knows for sure that they will be in a house for 20 years. I'd say that $7K to pay down an interest rate is a chunk of change. I'd rather pay the $7K towards my house, in my pocket, instead of the mortgage broker who is collecting the points.
It was around a 40k difference in interest. That is not counting the additional higher total(payment + extra principal) payment amount I'd have with the 30 year.
In my opinion, definitely makes sense to refinance. You are dropping the rate 1.5%, congrats.
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