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  • Refinance or invest

    Hi,

    I am not an expert in finances, so asking your advice in this. Planning to refinance :

    current home value 350k in TX

    Remaining months (152 months- almost 13 yrs)on current mortgage

    Remaining balance 250k

    Current rate is 3.625%

    Should I refinance for 10 yrs at 2.625%
    Plan to stay in this home for next 8-10 yrs

    Upside is that We will be done with the mortgage ( almost 3 yrs earlier than now) by the time my son starts college

    down side is 323$ extra payment per month


    what do you recommend? If you suggest to instead invest 300$ monthly somewhere, pls suggest where to invest. Thanks a lot ?

  • #2
    Anyone has any advice? Currently I am on 15 year term and have 13 years to go. Also, no closing costs for the 10 year option. Myself and wife are both in health care.

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    • #3
      why would you go shorter term?

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      • #4
        What are current rates on a 15 year?

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        • #5
          Either is probably fine. For a delta of three years personally I would not bother. Invest the nominal funds you would otherwise be putting towards the mortgage. Think about it like this. Going from 3.6% to 2.6% is a 1% return. You should be able to do better in the market over the time period you suggest you are going to live in the house.

          Why and where to invest? Well, since you mentioned college, a 529 is a good choice. If you have that covered, then invest in whatever asset allocation you have already established for the long term. Assuming you have fully funded your tax deferred (401K etc.) and backdoor Roths? Then go to taxable accounts. invest in some combination of Total stock market index, total international stock index, and total US bond market.

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          • #6
            The best answer for you depends on your current excess cash flow and what you would do with the money if you do not spend it on the mortgage. Maybe you can provide some more details.

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            • #7
              What's the cost for the refi? Should be in your good faith estimate. I use this refi calculator to help me:

              https://www.dinkytown.net/java/mortg...alculator.html

              You would want to break-even on the refi cost in less than 36 months.

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              • #8
                you could probably get same/better rate for 15 years mortgage.I would go with 15years and make additional principal payments as needed.

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                • #9
                  Thanks for your responses.

                  I have two options from my broker:

                  2.625% 10 years with no closing costs
                  2.325% 10 years with 3k closing costs

                  I calculated that I will be saving 26k based on total amount paid with the 10 yr refinance vs my current 15 yr mortgage

                  If I am saving 26k total and I am able to be done with mortgage earlier ( by almost 3 yrs), to me, it sounds a good deal, Am I missing something?
                  thanks for your guidance

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                  • #10
                    No closing costs? Your county has not transfer taxes? No appraisals? No points? No fees? OK, assume that is all true. Then the only comparison is what you would get by investing the $323 per month delta. ($323 X 12 Months X 10 years = $38,760, which beats $26K with no return on investment assumed. It doesn't look to me like this refinance would be a good use of your $323 per month.

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