Reply #9: lots of options [View All]

many people make a common mistake as follows:

take your example ... you started with a 30 year mortgage of $350,00 and have paid down the balance by $125,000 over 10 years ... this leaves a balance of $225,000 ...

other factors notwithstanding, you should not refinance the $225,000 over 30 years ... this is effectively incurring additional debt ... depending on your situation, it is often better to take a refinance loan for 20 years rather than 30 ... even at the same rate as the original mortgage, your monthly payments would go down if you refinanced the $225,000 over 30 years ... that's because you're spreading out the remaining balance over 30 years instead of 20 ... if your goal is to lower your monthly payments, fine ... but understand that you'll incur more interest expense over the term of the loan by extending the remaining life of the loan back to 30 years ...

i guess the point of all this is that you need to analyze your situation ... don't assume that the term of the loan should remain the same with a refinance ... if you have the money, you might even consider taking a loan for less than your current outstanding balance or for a shorter term ... the only way to know is to run the numbers ...