No. of Recommendations: 2
So I spoke to the mortgage co. today. They basically offered me a couple of options:
15 yr @ 3.275
30 yr @ 3.875

The 15-year bumps my current payment up about $200 a month.
The 30-year reduces my current payment by about $400.

This is for no points, and refinancing the existing amount (~350k). I could reduce the amount financed if that were to make any sense.


Something's not right in those numbers. The P&I for a 15 year $350k loan at 3.275% is $2464 The P&I for a 30 year $350k loan at 3.875% is $1646 There is an $818 variance between these, yet, you are saying that the difference from your current payment is a $200 increase vs a $400 decrease, which is only a $600 variance. You're missing $218 somewhere.

That said, either one would be a much better option than the 6.75% ARM that you currently have.

Also, I only plan to remain in NJ for another 7-9 years. Does that play a role in whether a 15 or 30 year mortgage (or just pay it off completely) is a better choice?

Not really. If you had a plan to retire in this house in, say, 15 or 16 years, and you wanted to have the house paid off when you retired, that would suggest that you should either pay it off now, or go for the 15 year mortgage, rather than the 30 year mortgage. But since your (current) plan is to sell the house before either mortgage would be paid off, then the main consideration is - do you refinance the house in order to invest the money you would otherwise use to pay the mortgage off, or do you pay it off, and start investing the money that you would have used for mortgage payments? Since you can get a sub 4% loan with either option, my suggestion would be to refi the house - but that's really up to you, and how well you will sleep at night with that decision. If having a paid off home and less in investments will help you sleep better at night, then pay off the loan. If having more invested while being required to make a monthly mortgage payment will help you sleep better at night, then refi the house.

Since both refi options are sub 4%, and, at least for now, you aren't planning on keeping the house until the mortgage is paid off, the more important issue is probably cash flow, which would suggest that the 30 year mortgage would be better, since it has a lower required payment. But again, if it will bother you to be paying 3.875% on the 30 year loan, rather than the 3.275% that you could get for the 15 year loan, and you can afford the increase in monthly cash flow without having to cut back on things like 401(k)/IRA contributions, then you should go for the 15 year mortgage. Personally, if I were going to refi in order to invest, I would go for the lowest required payment - which would be the 30 year. I would also be diligent about investing the difference.

AJ
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