Dear Dr. Don,

I have been approved for a refi of 3.25% for 15 years ($60,000 mortgage, appraisal completed of $167,000) which will reduce my payments by $106 per month. Now, I'm thinking I should have done the refinance for 30 years at 4.125%, which would reduce my payments by $237. What is your opinion? And is it possible to request the lender to change from a 15-year to a 30-year mortgage? The settlement is in three weeks.

-- Charles Change-up

Dear Charles,

Know your goal in refinancing your mortgage, and you'll know which loan term is right for you. Most homeowners are looking to minimize their total interest expense. Extending the loan term back out to 30 years doesn't accomplish that goal, even with today's low interest rates.

Homeowners typically extend their loan terms when refinancing if they want to free up some money in their monthly household budgets. They'll take the hit on the higher interest expense to accomplish some other financial goal with the freed-up cash.

Don't confuse a lower monthly payment with lower total interest expense. If you can easily afford the monthly mortgage payment on the 15-year mortgage, don't extend the term out to a 30-year mortgage.

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