Do I Refi If I'm Likely to Move Out of Home?

By Dr. Don Taylor, Ph.D., CFA,

Dear Dr. Don, Would I see enough savings that it would pay to refinance my mortgage? The rate is now 4.25% and would be reduced to 3.25% if I refinanced. I've had this mortgage for three years, and it's a 30-year mortgage. The refinanced mortgage also would be for 30 years. We don't plan to be in this home for 30 years. We will probably sell this house in 10 to 15 years.

Continue Reading Below

Thank you, -- Kathleen Continuum

Dear Kathleen, It makes sense to refinance your mortgage if the interest savings are greater than your closing costs. You didn't tell me the loan balance, so I'm going to run the numbers for a $100,000 mortgage. The numbers will be scalable, so if you're looking to refinance a $200,000 mortgage you can multiply the interest savings by two.

Since you don't plan on being in the house for the full term, you won't capture all the savings in the above table. Here's what the savings would look like 10 and 15 years from now.

More On This...

As you can see, the savings look good in a refinance, even if you don't stay in the house for 30 years. Getting a new 30-year loan puts you a little behind on paying down the mortgage balance, but you can turn that around by making additional principal payments each month equal to the $84.16 difference in the mortgage payments.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.