Refi - 20 or 30?

[freshsqueezed]

I am unsure what to do if I refi.  We are currently on a 20 year loan.  We are thinking of refinancing to get a lower rate and taking some money out for some renovations at that time.  We are currently in a 20 year loan that we are almost 1 year into.  I would like to stay with a 20 year but my problem is I keep seeing rates that are the same for both 20 and 30 year with the actual APR being a touch lower on the 30 year.  If I have the discipline to keep making payments for a 30 year as if it were a 20 year does that make more sense?

[Accountingcat]

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[ny96]

Aug 21, 2020 11:57:01 GMT -5 Accountingcat said:

What is your job stability like? Do you have a big mortgage payment, high property taxes, or any high variables like that?

I think it depends on what your situation would look like with a job loss and if you need the safety net of a 30 year. I personally would prefer a 30 that I could pay as a 20. Paying as a 20-year-old isn't hard if you have the extra and set it autopay. My household income leans heavily on one person and my mortgage payment is big with escrow included. Although I have an emergency fund, it would be better to reduce all payments as much as possible so I like the buffer. (All that said, I just refi'd to a 20 year to get the lowest rate so moot point now)

I agree. It totally depends on your situation and financial goals. We are looking at refinancing and keeping a 30 year fixed. We’re looking to remodel in the near future and want our monthly payment to remain low, and paying off our house is not a major financial goal for us.

[simpsongal]

We just refied for a 20 yr even though the 30 was the same rate. We're pretty disciplined, so I think we would have paid more, maybe even auto debited more. But DH (especially DH) just didn't want the temptation to pay less, and the thought of adding years to our mortgage was more than he could bear (we were around yr 22 on our mortgage). We have very stable jobs too. 

So I think it all depends on your goals, your comfort levels, your discipline, etc.

[savan]

We always refi with a 30 year loan but we have the discipline to pay the extra. Our original loan was a 30 year at 4.875% in January 2010. We refi'd in 2016 into another 30 year at 3.625%. That loan dropped our payment by $600 but we set up auto payment to keep paying our original amount and threw that extra $600 back to the principle. If we continue with that loan/payment, the amortization tables say we'd pay off the house in December 2035, shaving a little over 4 years off our original loan.

We are getting ready to refi again. 30 years at 2.625% which would drop yet another $500 off our monthly payment. Again we will set up auto payment to put that money back into our loan, for a total of $1100 extra straight to principle. The amortization tables tell us that if we continue with that payment our loan could be paid off in February 2035, shaving almost another year off, and effectively giving us less than a 15 year loan.

I also ran the numbers with a 20 year and a 15 year but neither loan would save us much time in the end and I love the peace of mind of having the lower payment if needed. Should DH lose his job or we have a financial emergency, that's $1100 per month that we could immediately free up. This is likely our last refi though as I can't imagine ever getting lower than 2.625%.