Posted on: 13th Oct, 2010 06:41 am
We are 5 years into a 30 year mortgage right now at 5.78% rate. We received some quotes yesterday on refinancing for both a 15 and a 30 year loan and they are both very tempting offers and cannot figure out which one would be best.
With the 30 year the interest rate is 4.27% and we would save $270 month.
However, the 15 year interest rate is 3.5% and our payments would only go up $20 more than what we currently pay.
This is our starter home and we had bought it with plans to sell the house after 5 years, but then the housing market tanked so we will be there for a little longer than we originally planned. We are hoping to be able to sell 5 years from now.
On one hand we would have a good bit of extra money to put in savings each month and for unexpected or emergency expenses.
BUT, the $20 extra a month would not make any difference in our current budget and the princicple of our loan would get paid down faster.
Any suggestions on which one would be better?
With the 30 year the interest rate is 4.27% and we would save $270 month.
However, the 15 year interest rate is 3.5% and our payments would only go up $20 more than what we currently pay.
This is our starter home and we had bought it with plans to sell the house after 5 years, but then the housing market tanked so we will be there for a little longer than we originally planned. We are hoping to be able to sell 5 years from now.
On one hand we would have a good bit of extra money to put in savings each month and for unexpected or emergency expenses.
BUT, the $20 extra a month would not make any difference in our current budget and the princicple of our loan would get paid down faster.
Any suggestions on which one would be better?
Hi jkbrown,
In my opinion, it will be a good option to go for the 15 year loan as $20 won't be a big thing for you. Moreover, you'll be able to get rid of the mortgage within 15 years and your property will be free and clear!
Thanks
In my opinion, it will be a good option to go for the 15 year loan as $20 won't be a big thing for you. Moreover, you'll be able to get rid of the mortgage within 15 years and your property will be free and clear!
Thanks
Time value of money. I don't see housing appreciating too much any time soon so you're only going to get back what you put into it (probably less with the declining market and costs of selling it). I'd suggest going with a 30yr and putting that extra money in the bank.
