Mortgage Refinance, 20 year vs 30 year

I curious what other might do in this situation.

We are looking to refinance our mortgage. We bought the house 6 years ago, so we have 24 years left of a 30 year mortgage. Our currently P&I payment is about $1300.

The two options we are considering is a 20 year, to save interest and pay it off sooner. Or extend it back to a 30 year loan to reduce the payment and direct the difference into other debt. Once the other debt is paid, we could redirect it into retirement, back into the mortgage, or college education expenses.

Loan Terms:

20 Year 3.125%  Payment P&I about $1300 (interest savings over the current loan about $80,000)

30 Year 3.25%   Payment P&I about $1040 (If we put make regular payments of $1300, interest savings over current loan about $70,000, and would be paid off in about 20 years + 9 months) 


Our outstanding debit is as follows:

$15,000 (0% interest) HAVC Loan (payment ~$200 )

$4500 (~4.5% interest) in private student loans (payment ~$50)

$15,000 (~2.85% interest) in Federal Student Loans (payment ~150)


We are on pace to pay off the HVAC and private student loan in less than 1 year. At the moment, we are not looking to accelerate the federal loans.

I really like the idea of being debt-free (less the mortgage), but long term the idea of the larger interest savings and reducing the length of mortgage is very tempting as well.

I realize it really just comes down to our priorities, but I'm still curious what option some of you would choice. Sometimes an objective 3rd party can shed light on things that I'm not thinking about.


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    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 7 mths ago
    • Reported - view

    what are the closing costs excluding prepaids? (interest and excrow prefunding)

  • Like you said, it's all about your personal priorities. I myself like having the flexibility of extra cash on hand to be used where most needed. Especially at these low interest rates. Is this your forever home? Do you plan to be in it for the next 20 years? That's also a consideration and something you didn't specify.

    How big a deal is an extra $260 per month in your life compared to your income? Like you said, even if you did continue to pay like it was a 20 year loan, it would just tack on an extra 9 months or less than half a month per year. Just some more things to think about.

    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 7 mths ago
    • Reported - view

    to put in in perspective, an extra $250/month toward the private student loan would pay it off in 15 months instead of 78 months. However the interest saved is only ~$560. Tradeoffs everywhere.

  • Thanks for the replies.

    I don't see us moving for a while, at least 10 years would generally be safe to assume. 

    The non interest and non escrow closing cost is ~3000. 

    I agree tradeoffs both ways. 

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