Bought home 2 years back on 30year fixed at 3.875% interest rate. Thinking of moving to 15year fixed at lower interest rate. Anyone did it? Pros/cons?

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That’s the wrong way to look at it. Keep the money in the stock market and stick with 30’years.

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I’d take a look at what your interest rate could be. I’d be surprised if you could lower it by more than .25 of a point. If so, then I’d just make extra payments when you’d like but otherwise you retain the flexibility to pay less should situations change or else you want to put more in the market. When you refinance, you’ll be forced to always pay that higher amount

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I would do it if I was in your shoes but things to consider:

What’s the cost of refi (loan origination, appraisal, credit reports, personal time, etc.) and the benefit of the 15 year over just paying an $700 a month on your current mortgage, while considering how much longer you will be in the property. You see a big drop in the total interest paid due to the length of the note, not the interest rate, so just paying extra would probably put you in a very similar spot, save the refi costs and allow you to adjust if there was ever a reason you wanted to switch back to a lower payment.

Let’s say you are getting a .5% drop for shorter loan, but it is really only .4% when you think of the impact to mortgage interest deduction, assuming your itemize.

Home equity returns exactly 0.0% whereas you could invest that extra $700 in the market and be better off in 28 years. Or in ~13 years probably have a investment balance that you could just use to pay mortgage off.

Along the same lines, are you taking all tax advantageous accounts such as 401k, Roth (perhaps via backdoor), HSA, 529 (you can open one without even having a kid in your name and then transfer it free of any fees to a future kid), etc.

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15 year is worth it... look into refi via Costco. Great rates and super low costs. You can also negotiate no or limited appraisal cost

How much lower is the interest rate? If it’s not much lower, I would just pay the difference towards the principle

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Thanks for the feedback 🙏🏼

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You can make 8% in the market. Don’t spend more money on the mortgage.

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I’m doing it by marrying a physician

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Do it

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Don’t do it, just make the extra payments and you will basically save the same amount - just make the 15 year payment on the 30 year loan, this way if in 5 years if you have other stuff come up, you have an area of flexibility

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You can also lose 8% in the market. History states you are better off investing the extra money but it is a balance. A paid off house is a great way to be financially free. Split the difference, 350 in market, 350 extra to home mortgage. That will make a significant difference you pay over the long term. No need to refinance, you won’t get a better rate, you will need to pay for refi, and you will be stuck with a higher payment in the event you do need flexibility. It also rewards self-discipline

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Yes. If you can lower it by at least 1 point.

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Check out book "Pay off your mortgage in 5years” by Clayton Morris. He has a podcast too. He is a real estate investor with rentals. Not sure how much of the ‘strategy’ he talks about is applicable to first home owners. And I haven’t used his strategy myself but sure sounds like out of the box thinking.

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G*d damnit I just watched one YouTube video and he is advocating taking out a 401k loan to pay off a mortgage (that is probably under 4.5% interest) and hyping up how military folks love his system. What a f’ing snake oil salesman.

I see huge difference in total interest paid with ~700$ more on monthly mortgage. Paying around $1625 now and may pay around $2200 after switching to 15 year from 30year

Great to do it if you can handle the extra monthly payment

Stick with 30 year but make 15yr payments(extra principal) if you want to reduce total interest paid. The rate difference between them is so low that i would rather have flexibility of fixed expenses.

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