Mortgage question.

[TNDemo]

Would be interested in opinions on this. We are four years into a 15 year mortage, 5.25%. Right now our jobs are secure and we are making the payment without problem. I am somewhat considering getting a 30 year mortgage, which would half our payments. I know the rate would be higher but we could make double payments as long as our jobs hold out. My husband works in building hospitals and I am in a branch of the healthcare industry. If our jobs went south (or his in particular) we would not be able to get a mortgage so we would have to do it now. I really hesitate about this because we are making good headway but I don't want to face a big dilemma if we had to refinance. What do you think? I am leaning toward not doing it but wondered if I should prepare for what may be bad times.

[shraby]

1. It would depend on how high your payments are.

You have a really good rate of interest now. If you can make your payments using just one paycheck, keep what you have.

[DJ13]

2. The interest rate will be over 1% higher refinancing now

Your rate of 5.25% is really good.

30 Year Fixed 6.30%

15 Year Fixed 5.87%

On the right side of this page-
http://finance.yahoo.com/

[slackmaster]

3. In my opnion, the healthcare industry is one of the most stable places to be

Several people have quit where I work (in the real estate industry) to go to healthcare companies.

I think the fees you'd pay to refinance would not be worth any safety you'd get.

Do you have any equity to speak of? If so, consider getting a HELOC (home equity line of credit) as a second mortgage. You don't have to borrow anything unless you need it. There is typically a small annual maintenance fee, and if you get in trouble you can borrow against your HELOC to make payments on your first mortgage. (Required minimum payments on HELOCs are typically interest only.)

It seems to me you are in pretty good shape. I'm slightly better off, just over five years into a 15-year loan at 4.75% fixed. It feels good to see that principal balance go down.

[TNDemo]

4. You got a great rate.

We are making good headway and I hate to interfere with that. We have a big HELOC (zero balance) at a bank but I am afraid they will clamp down on using it since credit is getting so tight.

[Warpy]

5. Look at the total amount you will be paying, first

because that 30 year period means you'll be paying much more in interest than you would be by continuing your 15 year fixed mortgage.

Another thing to look at is interest rates. You are not going to get the same rate today on a 30 year fixed mortgage.

Other things to look at are closing costs on refinancing, how old you'll be when you've had to reset the payoff clock from 2019 to 2038, how it will feel to be under a debt burden for an additional 19 years when you could have been totally debt free, and whether or not you'll actually be able to invest those illusory savings in anything that will give you the return that paying off a loan at 5.5% would give you. Even doing double payments isn't the answer; although they'll decrease the monthly PITI over time, they don't affect the length of the loan.

I have paid off a house loan and I know there is no better feeling in the world than owning your own home outright. Offhand, I'd say paying the sucker off in a shorter time is the most advantageous thing to do. You've already paid most of the interest on this loan and are now paying principal every month. Resetting the clock is going to prolong the agony and give more of your money to the bank as you're resetting the amortization period to the "interest only" part again.

Health care jobs can and do go south, but health care is the type of field where retraining is possible and employment can always be found. The best bet would be to shave all the expenses you can now and save to give yourself a financial cushion should this be necessary.

[DemReadingDU]

6. Longterm, you save thousands of dollars interest with the 15-year mortgage

Preferably, I'd stay with the 15-year mortgage.

[SlipperySlope]

7. There is no perfect decision.

Knowing the right decision requires knowing the future:

- Will you keep your jobs.
- Will you be able to refinance at a later date.
- What will rates be in the future.
- How long will you stay in this house.

You can't know all these answers, so you can't know what the "right" answer is.

I can give you one alternative that you might not have considered though...

Refinance to a 30, but keep making the exact same payment you are making now. It will cost you a little more over the long run, but you buy yourself the flexibility to drop down to the lower payment whenever you need to if financial disaster strikes. This does require a high level of financial discipline though, many people can't keep themselves on such a track.

[TNDemo]

8. That was exactly what I was planning to do.

Pay as much as possible but have the option to drop back. I think I will just keep things as they are until things start to go bad (why is going south a bad term anyway??). Usually we can tell how many jobs are in the offing with my husband's job and when it starts to whittle down that may be the time.

[JackintheGreen]

9. I have to agree with Warpy

Keep the 15 year and pay the thing of in a decade. Healthcare is an awfully stable industry - all things considered - and non-residential construction does OK, too. Can it go south? Yeah...but if it does you'll be in the same position but with more of the house paid off. And you will probably be able to re-fi at better rates a down the pike (I'm thinking a few years, not months).

[sendero]

13. I also agree with Warpy..

... as I almost always do. The OP should not micromanage their situation. They have a great fixed rate loan, and going to 30 years will NOT halve the payment.

Even a point in interest will make a huge long-term difference, especially on a 30 year note.

Leave it alone, it's good.

[K Gardner]

10. I made the worst mistake of my life refinancing to a 30-year. Had I

kept the 15, my home would have been paid off today. As others have said, it requires a lot of financial discipline.

If you add up the tens of thousands of dollars in interest you save on a 15 year, it may give you pause about selecting a 30-year except in cases of absolute necessity.

I'm in healthcare as well, so my job is very secure and I am lucky to have excellent credit. Your rate now is enviable. If you have the option of waiting to see if "disaster strikes", I'd do that.

Best of luck to you !

[drhousingbubble]

11. Stick with solid 15-year rate

That 5.25% interest rate is solid and you are in one of the few industries that has a good economic forecast. I can understand that you would like to shave off a bit off your monthly nut but you are only going to find a higher rate for a 30-year given the current market. Also, amortizing the loan over a longer period is going to make you pay tens of thousands more in additional interest.

You’ve received some excellent advice on this forum

Good luck

[catdaddy1]

12. I would STAY where your at

It may be a long time be for we see 5.25 again. A 15 yr mortgage may be a bit steep to pay but if you can invest some extra money right now for any hard times that may arise, this will help you later on. We decided to refinance and got a 30 Yr fixed 5.65 and am paying an amortization schedule for a 15 YR loan. This will allow us to cut back on payments if we need to. I would NOT refinance if your rate is going to go up more than 3/4 to 1 pt.