It seems that refinancing is very likely a great idea (no reason to pay 5.75% when rates are 3.5-4% now). However, to answer the question about the right *term* of loan is more difficult.
It comes down to cash-flows and risks. The 30 year is going to have much lower payments, and if you will have guaranteed income (ie.SS, pension, etc) adequate to cover that for the extended term, it may make perfect sense to take the 30 year mortgage, even with the slightly higher rate, because of those lower payments and no need to accelerate paying back money when they will lend it to you so cheap.
However, and again, it comes down to the longer-term financial plan and cash-flows -- the 12 year mortgage will be paid off much sooner and then your family expenses will drop -- a *lot* for the rest of your lives.
We often model retirement in a couple of different phases - and walk though a "gap" analysis where we compute the level of spending, the level of guaranteed incomes (SS, pensions) and the gap between those guaranteed incomes and spending -- and that gap needs to be made up for out of drawdowns from retirement savings. The bigger the gap, the more retirement savings you need -- and the more *risk* you are taking (relying on investment income rather than guaranteed incomes) to cover that gap.
The difference between the 30 year and the 12 year, then, is mainly the *shape* of that gap:
With the 12-year -- the gap will narrow a *lot* 12 years from now with a paid off mortgage, though it may be a lot bigger in the short term.
With the 30-year -- the gap may be (a lot) smaller for the next 12 years, but it never really narrows (well, given life expectancies, at least one of you is actually still quite likely to outlive the 30 year mortgage).
Neither is right or wrong. They are both great opportunities to borrow at what are still historic lows. But you and your wife need to understand the trade-offs, what they mean, and how it affects your future cash-flows. In my experience, part of the issue underlying disagreements like this is different risk tolerances -- and an even bigger part of it is actually about communication -- you may not both be seeing the same things even when you're both looking at the same things. I encourage you to consider sitting down with a fee-only hourly financial planner to review not just the mortgages, but the whole financial picture and how those mortgage options factor into how you'll manage your future cash-flows, retirements, etc. A good planner will not only understand the numbers, but also facilitate the conversation between you and your wife to make sure you're not talking past each other. (Believe me. I work with couples on this sort of thing every day!). | 01.05.16 @ 20:18