I'm close to ER and thinking about refinancing my mortgage to reduce my monthly expenses. Has anyone done this? What's your opinion? Details are as follows: I have 5.5 years left on a 15 year mortgage at 4.5% and have a monthly P&I payment of $2500. If I refinance to another 15 year mortgage at 4% by P&I goes down to $1100.
If you are retired, my thought would be its more expensive to extend the term than it is to keep current mortgage.
If you are w*rking and saving, this is the same as the payoff your mortgage threads. It depends.
The best way to answer question is create a timeline, and associate costs and times to various events.
You have a current mortgage
its cost is $X (mortgage balance) and $Y (monthly payment) and $Z interest paid
On same timeline, put retirement date, mortgage payoff date, and any other significant financial milestones (like FI, kids college or other).
In addition list the amount of money you invest, and how much an A% return will give you at each milestone (for example use 8% and note the account values when mortgage is paid off, when you retire and when kids go to college)
If you are already retired, document current SWR and withdraw amount and carry this through a portfolio reduction.
Make sure on that timeline you sum up all your costs.
Then create an alternate timeline
Use the same items as above (if kids college was on timeline above, include it on second one too, if you left something off above, leave it off the second one too)
Use the refinanced mortgage numbers
$X balance (should be same as above), $Y (should be less than above) and $Z interest paid (my guess is this becomes MUCH higher on refinance). Add in another cost here for refinance closing costs.
Make sure you take the savings from mortgage and invest them- so take the money you would invest above and add the mortgage savings into it (if working)
If you are retired, adjust withdraw rate to lower amount and carry through.
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My initial reaction was you are "so close" to paying mortgage off it would not make sense to extend the repayment terms from 15 to 30 years (this usually doubles or triples the interest paid). I could see if you were retired, and needed to drop from a 5% SWR to a 3.5% SWR where this might make sense, but if it drops from a 5% SWR to a 4% SWR, I'd probably stick with higher SWR and in 4 years be mortgage free.