Q: I have just four years remaining on my 15-year mortgage. The interest rate is 6.25 percent. Should I look at refinancing the remaining balance of the loan? I’m not interested in getting any cash out of the refinance, and am not interested in adding any extra years of payment to what I have left.
A: I’m sure that if you keep hearing about folks like me who refinanced their 30-year loans to 15-year loans priced at 3.75 percent, it probably sounds pretty good. You might even be thinking you’re missing the boat.
But you’re far better off keeping the mortgage you have, or what remains of it. In fact, you’re barely paying any interest on your loan. The vast majority of every payment is actually repaying the principal owed on your loan.
When you chose your 15-year mortgage over a 30-year loan, you already cut a huge chunk of interest off the final bill. If you refinance now, it would be difficult to refinance a loan balance under $75,000 or $100,000, depending on the area in which you live because it’s more profitable for lenders to process bigger loans.
In addition, you’d have to fork over several thousand dollars just to refinance the mortgage, money that would be far better spent further paying down your loan balance.
The best thing you can do right now is to focus on paying off your loan in as little time as possible. It’s your cheapest and best option.