Asked by Julie  |  Submitted April 25, 2015

I have $165k remaining on a 27 yr mortgage at 3.75%. The current market value of our home is $264k. Should I refinance now?

I plan to retire in 3 yrs.

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  Answers  |  5

April 27, 2015

If your goal is to lower your current monthly obligation, and not concerned about the loan outliving you, current interest rates would seem to be an encouraging factor. Even though you are close to retirement, I still would recommend getting the longest fix-rate mortgage available. If you want to pay off the loan early, budget for it, but put the difference between the monthly obligation and the amount budgeted into a separate savings vehicle. The life insurance industry has products available that are paying interest not to different than current mortgage rates. The spread is worth the cost when one considers the availability of funds during an emergency or reduction in income..

$commenter.renderDisplayableName() | 02.21.17 @ 12:15

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April 27, 2015

That should be 'fixed-rate' mortgage. and 'not too different.from.'

$commenter.renderDisplayableName() | 02.21.17 @ 12:15

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May 06, 2015

Julie ...if your plan is to retire in 3 years and keep the home and loan indefinitely ....keep what you have as 3.75% fixed rate is great ....if you plan to move/ sell in a shorter period - than the answer may vary

$commenter.renderDisplayableName() | 02.21.17 @ 12:15

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May 06, 2015

Assuming David is correct about your current interest rate, I agree. If, on the other hand, it is an ARM, I would recommend refinancing.

If you have been paying extra in order to accelerate the reduction of your loan balance, I believe that you would be wiser to redirect these extra payments to build a reserve for future emergencies, such as making house payments at a time of income interruption or unexpected expenses.

$commenter.renderDisplayableName() | 02.21.17 @ 12:15

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June 01, 2016

As the prior answers have demonstrated, to answer your question does require more info on your plans. How long do you expect to be in your home? How stable is your income (sounds like that may well be changing soon)? Do you have ample savings for emergencies? You're only 3 years into the 30 year loan, so the monthly savings of just going to a new 30 year will be fairly minimal as 3.75% is a good rate. Unless you want to shorten the term or get some cash out to payoff other liabilities, I don't see any compelling reasons to refinance. Hope this helps, if you have more questions, feel free to contact me through my profile, I write loans nationally. Thanks, Ted

$commenter.renderDisplayableName() | 02.21.17 @ 12:15

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