15 year versus a 30 year

I receive many calls these days about refinancing into a 15 year loan. They aren't for everybody but it's always something that a smart loan officer will recommend, mainly because the rates are so incredibly low. One of the complaints I hear also is "I don't want to start over on another 30 year fixed mortgage because I already paid 5 year". Completely understandable. There are also 20 and 25 year loans for people that don't want to start over. Take someone that owes 417k on a 30 year at 5.5% That is a P&I payment of $2367 per month. Today you can replace that mortgage with a 15 year at 4.25%
Now that means you pay $770 more per month and it must be considered how you pay that higher amount. It also means you should be able to pay it and still save for retirement, college plans etc. Shaving 10 years off the mortgage though is a huge savings in interest payments. You would still owe $289k 15 years in the 30 year mortgage. With a 15 you owe zero. My feeling is that our homes are the primary method we retire and not worry about money. Previous generations paid their mortgage, lived there until they retired and moved to Florida and paid cash. Our generation has moved away from that and will lead to further problems for all us down the road. My feeling is get debt free including your home as fast as possible. Think of it as a forced retirement account. Over the 15 years of the new loan you will spend $138,600 but save $289,000 over the same time period. Does that make sense and sound good? It does to me but again only if the overall payment plan works in your overall financial strategy. As I said a good loan officer asks those types of questions and makes sure this is the best fit for you. Is it a cash flow problem monthly or are savings down the road? Let me know how I can help you.

Thanks,
Brent