Should we refi?

[blue1980]

Since the rates are so low, DH and I have been tossing around the idea of doing a refi for a while now, but we were not sure if it was a good move. We did a refi about 2 years ago and went from a 30 year mortgage to a 20 year. Our rate is 4.25.
I found out this week that I might get laid off in January and DH is in the process of interviewing for a job with a start up company. We could still handle our mortgage if I were to be unemployed and he switched jobs, but it would be tight. I am wondering if we should go ahead now and refi back to a 30 year just to give us some extra breathing room in our budget? I have a call into our bank for the current 30 year rates but I have not heard back yet. Is it silly to go from a 20 to a 30 year mortgage right now?

[whitepicketfence]

I don't think it's silly, but I would probably look at other areas in my budget that I could cut back in the event of a job loss. Do you have an efund? If so, how many months of expenses do you have saved? Can you start bulking up your savings now just in case?

I would still look into doing a refi though. Whether or not it would make sense would depend on the closing costs (can you pay these without rolling them into the new mortgage?) and the interest rate you could get. I would run the numbers on what your monthly payment would be for a 20 year vs a 30 year. Depending on the amount of your mortgage, there might not be a huge difference between the two. We have a smaller mortgage and it was only a difference of $100/month or so.

[blue1980]

We have a healthy efund (6 mo +), and if we did some serious budget trimming I think we could get by on DH's income alone. I think that reducing our mortgage payment would just make things a little more comfortable. But I don't want to do it if it is a bad idea long term.

[noodleoo]

You could refi into a 30 year and just keep making accelerated payments to try to pay it down early. But if your rate drops by 1%' your payments will drop and you may not need the 30 year to get the breathing room you want. Run the calculations and see how different the payments are. There may it be that big of a diff. If it isn't much, I'd stay with the 20 year. Unless you are really worried about it, there is also nothing wrong with doing a 30 year if it gives you piece of mind.

[dr.girlfriend]

I don't think it's silly. Compare the rate differences between a 20-year and 30-year, but peace of mind would be worth quite a bit, and as others said you can always make extra payments. As long as you guys are certain that job changes would not require you to move.