Should I refinance my mortgage?

[Starsky]

Nothing new to add here, but +1 for the refi, and for giving yourself some flexibility. Good for you to look ahead and prepare for an uncertain future. It doesn't keep you from paying off the principal faster, and you can keep your payments at the old [15-year] level until you are forced to adjust b/c of changes to your income.

If you lose your job, or earn less money, it could become very difficult to refi or to get a HELOC. (IME, HELOCs are harder to qualify for than first mortgages).

Not the same situation, but my wife and I did a 30-year refi/consolidation after we retired to free up some cash flow so we could avoid hitting our 401Ks for as long as possible. There will come a time when we might use other appreciated property to pay it off, but we don't really need to pay off our primary mortgage faster with our excess cash. For now, we value maximizing our free cash flow more than our net worth.

 

[HI Bill]

Currently I have 3% 15 years and balance is 170k. I am planning to refinance it to 30 years at 3.5%. My monthly payment will be lowered from 1600/month to 800/month. This can reduce my total monthly expense from 4100 to 3300.

Refinancing to take on a higher interest rate, additional closing costs, and adding 20 years to your loan doesn't make any sense to me, if FIRE is your goal.

In April of this year, you were sitting on $110K in cash. Why not just use part of that to make up the difference until you find a new job. Also, you can file for unemployment, if it takes you a while, and that should easily make up the $800 difference. If refinancing costs you $2,400, that's already three months of the $800 difference in payments. Add to that the extra interest, and you'll be paying far more in the long-term.

Spending 4-5% of your investments annually won't get you to FIRE, at your age, and with your assets. You shouldn't have day care expenses if you lose your job....cut spending, don't increase the interest you're paying....take unemployment, then find another job. At 38 / 33, you're far too young, with far too few assets to take your foot off the pedal.

 

[jimnjana]

No on refinancing. Yes on rebalancing portfolio. Sounds like your career requires a larger emergency fund for those periods between contracts. Take advantage of near record stock market to harvest gains. You should be eligible for unemployment benefits as well.

 

[jw72]

I understand how you feel. It is best to stay the coarse and keep your loan, but I would refinance in a 15 year no cost loan. Your payment would be 1173.00 for 170K. at 3 percent. When your job situation improves and you have an emergency fund you can make extra payments.
In CA I saw an ad for owning.com no cost 15 year just under 3 percent.
Good luck in what every you do.