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Two years into a 20-year mortgage. Should I accept this refinance offer?

Q: I am in my third year of a 20yr mortgage of $138,000 @ 6.375%. I have been offered a 15yr @4.1%. Should I take advantage of the refi? I plan to stay in the home long term. Also is the refi based on the remainder of the loan or the original amount?

A: The refinance is based upon the remaining outstanding balance of your mortgage. Since you'll be cutting a couple of years off of your loan, you'll be able to realize some pretty fair savings from both the interest rate break and not having to make payments for the two years you chop off the term.
It's probably a good idea for you to take advantage of the refinance offer. You do need to be aware of the costs of getting the new mortgage, and you might consider adding them to the loan balance or trading them off for a slightly higher-than--market interest rate. To see how these choices will affect your savings, you should use our Tri-Refi Refinance Calculator which will show you side-by-side comparisons as well as your savings against your existing mortgage.

More help from HSH.com

  • When refinancing at a higher rate makes sense

    Trade your old mortgage for a new, higher-rate version? There are times when it actually makes sense.
  • Should I pay off a mortgage early?

    By making extra principal payments or refinancing your mortgage, you could pay a lot less interest and free yourself from your mortgage ahead of schedule. Here are the pros and cons of retiring your mortgage early.
  • Are ten-year fixed-rate mortgages (FRM) available anywhere?

    Sure! Virtually all lenders who sell product to Fannie Mae or Freddie Mac will be able to offer you mortgage with a 10-year term. However, interest rates are usually the same as the lender's 15-year offerings.

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