Mortgage refi. question

I have two options right now. If I do a 15yr refi, I would pretty much keep the same payment. If I do a 30yr refi., I would "save" about $300/month.

In my spreadsheet, at the end of 2 years, the principal is about $1500 greater with the 30yr.

If I were to sell in 2 years, which would be the better option?

I could also pay some extra into the 30yr to pay off more principal, but if needed hold on to some of it depending on the month.

What say ye? Thanks!

How much are your closing costs? Can't forget that.

If you are planning to sell in two years, a refi does not make a whole lot of sense. You won't have enough time to build up more equity, and that closing cost thing comes into play, too. If you are currently on a 30 yr and plan to sell that quickly, I'd skip the refi and put, say, $150 (half of the 'savings') either in a savings account or toward the principal on the existing loan. As always, separate check, make sure you write 'apply to principal on loan yada yada' on it or it will mysteriously get applied to your interest.

CGLockRacer wrote: I could also pay some extra into the 30yr to pay off more principal, but if needed hold on to some of it depending on the month.

This has been my method for 17 years and 3 houses.

CGLockRacer wrote: I have two options right now. If I do a 15yr refi, I would pretty much keep the same payment. If I do a 30yr refi., I would "save" about $300/month. In my spreadsheet, at the end of 2 years, the principal is about $1500 greater with the 30yr. If I were to sell in 2 years, which would be the better option? I could also pay some extra into the 30yr to pay off more principal, but if needed hold on to some of it depending on the month. What say ye? Thanks!

If you're looking at a 2 year window, neither is probably the right answer. Get a quote on a no-cost. It could lower your rate and/or term some (though not as much), but you won't have to consider the payoff window that you do with a conventional.

CGLockRacer wrote: I have two options right now. If I do a 15yr refi, I would pretty much keep the same payment. If I do a 30yr refi., I would "save" about $300/month. In my spreadsheet, at the end of 2 years, the principal is about $1500 greater with the 30yr. If I were to sell in 2 years, which would be the better option? I could also pay some extra into the 30yr to pay off more principal, but if needed hold on to some of it depending on the month. What say ye? Thanks!

Unless you're current rate is really low and your mortgage is SUPER small, in 2 years the difference in equity should be MUCH greater.

We are getting ready to refi to a 15 year (2.5 years in to the current 30 year), I'll be refinancing $97k.

I paid $5700 in interest last year, the new loan will pay $2400 in interest in the first few years.

Take it out to 5 years from now with our current loan vs the refi and the equity difference is ~$19k

There are no-cost options out there, but at a slightly higher rate. That's what we did. If you are thinking you'll sell within two years, you are unlikely to recoup the costs associated with origination of the loan.

Thanks again, everyone! GRM really is the smartest, friendliest forum ever!

Oh and my equity difference includes the closing costs rolled back into the loan. If I came out of pocked for the $4k, the equity difference would be even greater.

I've decided to hold on right now. Won't be enough savings for the short term. Thanks for the help! Maybe the housing market will come back enough for me to at least break even in a couple years...