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Guest

I have 10 yrs to go on a 15 yr, 5.25% fixed rate mortage. Loan amt was $176K. Current bal is $132K. I also have a 15 yr HELOC with a variable 2.5% and bal of $29K.

Does it make sense to refi a 15 yr mortgage? The calculators I've found don't show the bottom line.

shane · Posted: Mon Oct 19, 2009 2:46 pm Post subject:

What would your goal in refinancing the 1st mortgage be?

jveenstra · Posted: Mon Oct 19, 2009 3:31 pm Post subject: Refinance

Probably does not make much sense to refinance.
If you started 15 year at $176,000 mortgage at 5.25% your required monthly P & I is $1,414.82
Right now an interest only payment on the HELOC is about $60 monthly.
If you refinance and combine the two and cover $6,000 in closing costs and prepaids (just to pick a number for example). your new mortgage would be $167,000 for 15 years. You should be able to do better than a 4.75% interest rate right now, but, I'll use 4.75% as an example.

Monthly P & I for a new 15 year mortgage of $167,000 at 4.75% would be $1,298.98. For 180 payments you would pay $233,816.
Presently on the first and second mortgage you pay monthly $1,474.82. If you voluntarily pay $1,474.82 on the new mortgage (same as you pay now), the new mortgage would pay off in 151 months for a total of $222,423.

Your present mortgage has 120 months left at $1,4141.82 monthly and total payments will be $169,778. If we make believe you pay off $29,000 HELOC in 15 years at 2.5% you pay $34,740. Between the two you pay $204,000 in total which is $18,423 more than you pay now over the next 15 years.
The only reason to refinance would be to lower your monthly payment by $176 a month if that is more important to you than what you pay over the life of a new loan.
The HELOC is not going to stay at 2.5% when inflation kicks in and the priome ratre rises. NO idea when or how fast that happens but it will take a while to "lose" $18,000 over the next 15 years in my calculation "assuming" 15 year pay off at 2.5%.
Probabaly makes most sense to keep what you have and make as much extra payments on the 2.5% HELOC as you can so the balance is as small as possible when inflation kicks in and the HELOC rate rises.

Guest

Thanks much. I am paying $600/mo principal only on the HELOC and a few hundred principal only pmt every once in a while on the mortgage. I want to get both paid off as fast as I can so I can retire early. Even though my mutual funds have made a strong turnaround YTD, getting these bills paid off is a guaranteed return.

jveenstra · Posted: Tue Oct 20, 2009 8:35 am Post subject: 15 Year

You're doing a good job--already paying extra and what you have now appears to be best to keep and not refinance

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Refi a 15 yr mortgage?