Market

I’m 66 and have $47,000 left in my 30-year mortgage. I’ll be 90 when it’s paid off. Should I refinance to a 15-year fixed?

[ad_1]

Dear MarketWatch,

I’m 66 and have a mortgage with $47,000 left on it. My interest rate is 3%, and it’s a 30-year fixed-rate mortgage. I pay $136 a month.

My mortgage was due to be paid off in 2027. But my old lender decided to sell my loan to another, and now it looks like my mortgage will only be paid off when I’m 90 years old.

I want to refinance my loan to a 10-year or a 15-year fixed-rate mortgage, to pay the loan off sooner.

So my question is, is it a good idea to refinance? Please advise.

Signed,

No Luck

The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.

Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.

Dear No Luck,

Looking at current mortgage rates, I’d say you’re better off not refinancing your 30-year fixed mortgage.

I know you want to pay it off fast. But you’ve got a mortgage with a 3% interest rate. You’ve snagged a historically low interest rate, which we may not see again for years.

If you want to refinance, your monthly payments could go up. The mortgage rate for the average 15-year mortgage is over 5%. I’m not certain if you want that, as you may now be retired, or planning to retire very soon.

If you’re thinking of doing a cash-out refinance, David Krebs, who is a Florida-based mortgage broker, said that it may be a good idea, as long as you have enough equity in your home and the property value is high enough. 

If you’ve got a “pressing need for cash,” Krebs said, “then it might be worth paying the higher interest rate in exchange for being able to tap into the equity.” Pressing needs could refer to medical bills, or urgent expenses. This would be an emergency, and I caution you against doing it if at all possible.

Krebs also suggested considering a reverse mortgage to pay off your mortgage using the equity in your home, and then borrow a part of the remaining equity — either as a monthly payment, lump sum or line of credit. But do your own research before choosing this option.

You also said that your mortgage transferred hands between lenders, and — based on you saying you’ll be 90 when it’s paid off — the duration got extended by 20 years. I’m not sure why that happened. Krebs agreed that this doesn’t make sense. 

On possibility: You may have entered into a loan modification with either the old or new lender.  A loan modification is a mutual agreement, where both the borrower and the lender sign a written agreement modifying the terms of the loan. In your case, the maturity of the loan was likely extended by 20 years, Krebs explained. 

But “it is not normal or legal for the lender to unilaterally extend the term by 20 years,” he added. So double-check to see if you had signed a document that extended the duration of the loan.

And back to the refinancing question with a final warning. The mortgage rate on a 15-year fixed-rate mortgage just inched up to 5.54%. If you refinance, the price of being debt-free sooner may eat your monthly budget.

By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

[ad_2]

Source link

Jake

Jacob Keiter is a husband, a writer, a journalist, a musician, and a business owner. His journey to becoming a writer was one that was paved with challenges, but ultimately led him to find his true calling. Jacob's early years were marked by a strong desire for creative expression. He was always drawn to music, and in his youth, he played in several bands, chasing the elusive promise of fame and success. However, despite his best efforts, Jacob struggled to find the recognition he craved. It wasn't until he hit a low point in his life that Jacob discovered his love for writing. He turned to writing as a form of therapy during a particularly difficult time, and found that it not only helped him to cope with his struggles, but also allowed him to express himself in a way that he had never been able to before. Jacob's writing skills quickly caught the attention of others, and he soon found himself working as a journalist for The Sun out of Hummelstown. From there, he went on to contribute to a variety of publications, including the American Bee Journal and Referee Magazine. Jacob's writing style is reflective of traditional journalism, but he also infuses his work with a unique voice that sets him apart from others in his field. Despite his success as a writer, Jacob also owns another business, JJ Auto & Home, which specializes in cleaning. Jacob's commitment to excellence is evident in all of his endeavors, whether it be in his writing or in his business ventures. Today, Jacob is the author of two books and continues to inspire others through his writing. His journey to becoming a writer serves as a reminder that sometimes our darkest moments can lead us to our greatest achievements.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *