We currently have a $150k 15 year loan at 4.875% and we currently have 7yrs more to payoff.  Should we refinance to a lower rate? What term would be the best benefit for us? This is our only debt.

If you go to a new loan at a 7 yr term your payments will jump even at a lower rate (low 3's).  I would just make some extra principal payments and pay it off quicker that way.

Hi Tracey,

You need to ask yourself a couple of  questions before we can find the right answer for you.  Is your goal to pay off the loan and when - or do you want to lower the monthly payments and extend the loan repayment time for the (current) tax benefits?  If better cash flow is the answer, and you do not mind adding a few extra years to your loan repayment then a refinance might make sense.  If your goal is to pay off the loan as quickly as possible there are options for that. 

If you post your current monthly payment and let us know if you want to pay off your loan or lower your monthly payments -  it will help us to help you work with real numbers to see if a refinance is right. 

To make the right decision - we will take your current monthly mortgage payment x 12 x 7 to find the total amount your payments will be to keep your current loan.   Sometimes, if your current payment is much higher than a new refinance payment, people often pay the same loan amount per month which allows them to pay off the new loan faster - so if you pay 2,000 per month now and your new loan payment is 1400 per month, paying the same 2,000 will pay off the new loan faster and cost less. 

Right now, a 10 year fixed is in the 3.250% range which would = 1465.79 monthly = 175,894 to pay off the loan in 10 years. 

15 year fixed @ 3.625% = 1081.56 = 194,679 to pay off the loan in 15 years. 

If you can get a 10 year fixed at 3.25. Your monthly payment is 1465.79 your total payment would be 175,894.25.  Pump in some extra amounts and you can reduce the number of years!!!  That would lower your total payments too!!!

If you are based in California, I can help.

Jacob Varghese

NMLS 327086

http://swanloans.com

If you refinance into a new 10 year fixed rate, and pay 1800 per month as you are now - you will pay the loan off July 15, 2019 - for a total cost of 172,800 - so it does not make sense for you if you wan to pay off the loan in 7 years and lower the total cost of the total loan pay off. 

However, I think your numbers must be off somewhere - either you have far less than 7 years left on your loan - or your loan balance or monthly payment is off - as 1,200 repaymentof interest over the next 7 years on a 150,000 loan balance @ 4.75% does not calculate ...

The only advantage for refinancing into a new 10 year fixed -is - it will reduce your monthly payment by 335.00 per month - some lenders offer a 7 year fixed rate - my bank does not - so you could search for a lender offering a 7 year fixed rate loan - and see what the total pay out for that loan

Hope this has helped!

It is worth checking with your CPA about the tax-advantages  of a new mortgage?

Jacob Varghese

http://www.swanloans.com

Excellent point - always up for debate, the tax deduction of mortgage interest - but if you refi into a new loan - you will pay more interest - a lot more than you are paying now -  in the first few years - thus your tax benefit might make a refinance even more of a  benefit to your total financial picture - but do remember, tax laws change ...

Sounds like your original balance was around $235K? If you are down to $150K with 7 year left I don't see any way to benefit. We offer a 7 year term through our home equity division at 3.99% w/ no costs, but even in this scenario your payment goes up. If you are comfortable with the current payment I would sit tight. You are paying primarily principal each month now...and that is a great place to be.