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Refinance 30 year mortgage to a 15 year?

I currently am in 2nd year of a $505,000 mortgage at 4.875%.  Balance is $484K, and I make additional $800/mo principal payments.  I can get a no closing  cost 15 yr mortgage at 4%. I plan on moving in approximately 7-10 years, and have a secure job, steady income, and high FICO score. Does this make financial sense, or is it better to just continue to pay the extra principal at the higher 4.875% interest rate?  My rough calculations seem to suggest substabtial savings over the life of the 15 year  loan v. 30 year loan, but I'm not sure I am considering all the factors.  Can anyone give me some advice on this?  Thanks
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January 30 2011 - Seattle
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It's worth looking at closely.  Are you sure you can get a mortgage for that amount at conventional rates.

You either need a super conforming loan for more than $417,000.  Not sure what the super conforming limit is in your county.

Or you can get a combo loan.

You need to make that determination before you can begin to calculate the options.
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January 30 2011

If you pay an additional $908 per month on existing loan, then you will owe $323,668 after 7 years of payments from this point. If you get the 15 Yr at 4% and no closing costs, then you will make the same payment ( $3580) and owe $259K after 7 years.

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January 30 2011
I suggest you stay with what you have and just keep throwing money at it. Your rate is low and you already in your second year of amortization. This will be kicking in a higher portion of your payments to principal as the years in the loan increase.

Going with the 15-year, your amortization schedule starts all over and if you do have a financial need for the extra money or the payment, the 30-year will be easier to manage.

Happy funding, Rudi
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January 30 2011

This makes a lot of sense.  You are paying around $2000 a month in interest and that would drop to $1600-ish at close. 
At your current payment schedule, you would pay around $260,000 in interest.  With the new loan, that amount shrinks to about $199,000 over the life of the loans.  So over the 7-10 years, you should be saving 10s of thousands of dollars...and remember, that's at no cost to you.

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January 31 2011

Sounds like a no-brainer to me.  

The only concern would be if the mandatory commitment to the 15 year payment could cause problem in the future if there was an unexpected loss or reduction in income.   Since you mention secure and stable income, that seems a non-factor.

The math has already been done well in this thread.  Realize that a portion of that effective savings would be reduced when you factor in a lower tax deduction each year with declining interest, but as long as you getting a no cost refinance, even a small reduction in rate is worthwhile.

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January 31 2011
 
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