BoosterParticipantStatus: Other ProfessionalPosts: 1Joined: 03/11/2019
My wife and I have a mortgage of 354,000 at 4.65% with about 22 years left, and can refinance with no closing cost to either a 15 year at 3.875% or 20 years at 4.375%. If we did the 15 years it would raise our payment by $400 a month and the 20 years would keep it around the same. We are also aggressively paying off student loans of 330,000 at 5.8% over the next three years. Would it be better to just take the 3.875% for 15 years or take the 20 years which would give us a little bit more flexibility/put it toward our student loans? Thank you for your input!March 10, 2019 at 10:06 pm MST #197364ZaphodParticipantStatus: Physician, Small Business OwnerPosts: 5647Joined: 01/12/2016
Whats your payback period if you do 20 years after closing, etc…? Is it better than say putting those closing costs in an extra payment. Run the numbers.ENT DocParticipantStatus: PhysicianPosts: 3024Joined: 01/14/2017
The decision to go with a 15 year mortgage creates negative $400 cash flows per month for 15 years but in years 16-22 you have positive cash flow per month of ~$2,144 (derived from the Excel PMT function based on the numbers provided). That yields a 8.245% APY hurdle rate, or IRR. That is a good thing working for you.
The student loans, on the other hand, are hurting you at a 5.96% APY.
I would refinance to the 15 year and pay off the student loans ASAP.PedsParticipantStatus: PhysicianPosts: 3618Joined: 01/08/2016We are also aggressively paying off student loans of 330,000 at 5.8% over the next three years.Click to expand…
can these also be re-financed?March 11, 2019 at 4:58 am MST #197433mianesmdParticipantStatus: PhysicianPosts: 18Joined: 03/08/2018We are also aggressively paying off student loans of 330,000 at 5.8% over the next three years.Click to expand…
can these also be re-financed?Click to expand…
Yeah I agree personally I’d make refinancing those student loans a high priority as well. Using the student loan refinance calculator at nerdwallet.com (just the first one that popped up on Google) if you paid $330K off in 3 years with a refinanced loan at 4% instead of 5.8% you’d save $266/month and $9592 over the course of the 3 years. You could then pay off the student loans a little more quickly or use the extra cash flow toward your newly-refinanced mortgage.March 11, 2019 at 5:09 am MST #197435ajm184ParticipantStatus: Other ProfessionalPosts: 542Joined: 07/14/2017
My personal rule of thumb is that a refinance needs to be at least 50 bps lower before going through the hassle of a refinancing. In your scenario, I would only consider the 15 year refinancing. A rhetorical question; Does no closing cost mean no cost at all or cost of close is rolled into the refinancing amount? Having an extra 3 to 5k of costs potentially rolled into a refinanced loan is not something I would strongly consider unless your current option is some type of I/O loan.
Also agree with others comments; from a pure financial perspective, attacking the higher rate loan would be a better use of excess cash flow.