I’m trying to decide if refinancing my mortgage makes sense, and I’d love some input. Here’s my situation: Current Loan: 20-year mortgage (started Dec 2023) -Balance: $199K -Rate: 5.00% -Monthly Payment: $1,372 -Time Left: 18.5 years Property: Duplex (I live in one unit, rent out the other for $1,250/month) I have two refinance options: 20-Year Refinance (6.125% rate) -New balance: $173K -Monthly payment: $1,252 -I’d gain ~$26K in immediate home equity -Planning to still pay $1,372/month to pay it off faster (estimated payoff in 17-18 years) 15-Year Refinance (5.75% rate)-New balance: $173.5K -Monthly payment: $1,441 -I’d gain ~$25.5K in immediate home equity -Higher payment but saves on interest I also have to come out of pocket $3K for closing for both refinance deals. Would it make sense to refinance, or should I just stick with my current mortgage? Since I rent out one side for $1,250/month, my out-of-pocket housing cost is pretty low. The 15-year option saves more on interest but increases my payment. The 20-year refi gives me more flexibility, and if I pay extra, I can shorten the term. What would you do?

Note holder is selling the note at a discounted rate. Read all my posts, it explains in detail how this deal is being done.

Can’t wait, he needs the capital now. If I don’t jump on it then he will just go another route. Then I lose the cheaper note and 26k in gained equity.

@Hunter Jordan • Rate: 5.75% (15-year refinance) • New Balance: ~$173.5K • Monthly Payment: $1,441 • Term: 15 years (180 months) • Approx. Total Payment: $1,441 × 180 ≈ $259,380 • Approx. Total Interest: ~$85,880 Again, please double check the numbers yourself. i actually just posted yesterday about whether to choose 15 year fixed or 30 year fixed. Everyone says 30 years in that post (or almost everyone). That does make sense when comparing 15 year and 30 year fixed. You should check out that post too. A lot of good comments. Now back to your question, I would probably choose 15 year, because it is really not a big difference for me for the extra $100 or so. It's a larger difference if you consider 30 year fixed (which maybe you should look into?).

Should I Refinance My Mortgage or Stick with My Current Loan?

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

1y

I would not refinance into a higher interest rate - I would keep the existing loan if you can afford the payments

you also will have closing costs invoked to add to the new loan which again does not seem to be worth it in my opinion

7e investments53 Reviews

Website View Page

2 Reply

Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Chris Seveney:

I would not refinance into a higher interest rate - I would keep the existing loan if you can afford the payments

you also will have closing costs invoked to add to the new loan which again does not seem to be worth it in my opinion

Closing cost are tied in to the refinance. The out of pocket is $2500 earnest money and $600 for appraisal. Are you factoring in the $26k in equity gained and the lower note?
0 Reply

Erik EstradaBusiness Member

Lender · Member since 2022 · 6k+ posts · 1k+ votes

1y

I am trying to wrap my head around this. Why not just pay down your loan more aggressively? Shortening the loan term may make sense if you are going to reduce the interest rate as well. In this case, you are just getting into a higher rate and paying closing costs.

[email protected]818-269-7983

LuxePrivate Investments LLC 572 Reviews

Website View Page

1 Reply

Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Erik Estrada:

I am trying to wrap my head around this. Why not just pay down your loan more aggressively? Shortening the loan term may make sense if you are going to reduce the interest rate as well. In this case, you are just getting into a higher rate and paying closing costs.
But I instantly gain 26k in equity. My note now is 173k on the 20 year. Where my current note is 5 percent yes, but it’s 5 percent on a 208k note. So if I were to refi to a 20 year, my note goes down to 173k, I gain 26k in equity (199k owed - $173k for new note) and if I were to pay my same mortgage with the 20 year refi I would pay off the debt 1.5 years quicker ($120 extra now going to principal on a $173k note).

The only down side is the rate, the $3100 out of pocket, and the additional 1.5 year (going from a 18.5 year pay off back to a 20 with the refi) pay off, if I don’t pay extra on the mortgage.

If I choose not to pay extra on the mortgage of the 20 year refi then I just gained $120 in cash flow ($1372 current mortgage - $1252 20 year refi)

However I do plan to pay extra on the 20 year refi.

0 Reply
Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Erik Estrada:

I am trying to wrap my head around this. Why not just pay down your loan more aggressively? Shortening the loan term may make sense if you are going to reduce the interest rate as well. In this case, you are just getting into a higher rate and paying closing costs.

Let me add that if I pay extra on the 20 year refi I will pay it off in 17 - 18 years and my mortgage stays the same.
This is also a seller financing deal and the individual I am financing through has agreed to sell the note at $163,500 plus $2500 in earnest money. $173k refi is because closing cost are tied in. I currently owe 199k on my current mortgage and have 18.5 years left until pay off.

0 Reply
Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Hunter Jordan:

Quote from @Erik Estrada:

I am trying to wrap my head around this. Why not just pay down your loan more aggressively? Shortening the loan term may make sense if you are going to reduce the interest rate as well. In this case, you are just getting into a higher rate and paying closing costs.
But I instantly gain 26k in equity. My note now is 173k on the 20 year. Where my current note is 5 percent yes, but it’s 5 percent on a 208k note. So if I were to refi to a 20 year, my note goes down to 173k, I gain 26k in equity (199k owed - $173k for new note) and if I were to pay my same mortgage with the 20 year refi I would pay off the debt 1.5 years quicker ($120 extra now going to principal on a $173k note).

The only down side is the rate, the $3100 out of pocket, and the additional 1.5 year (going from a 18.5 year pay off back to a 20 with the refi) pay off, if I don’t pay extra on the mortgage.

If I choose not to pay extra on the mortgage of the 20 year refi then I just gained $120 in cash flow ($1372 current mortgage - $1252 20 year refi)

However I do plan to pay extra on the 20 year refi.

Correction, my current note is 199k
0 Reply
Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
1y
Quote from @Hunter Jordan:

Quote from @Erik Estrada:

I am trying to wrap my head around this. Why not just pay down your loan more aggressively? Shortening the loan term may make sense if you are going to reduce the interest rate as well. In this case, you are just getting into a higher rate and paying closing costs.

Let me add that if I pay extra on the 20 year refi I will pay it off in 17 - 18 years and my mortgage stays the same.
This is also a seller financing deal and the individual I am financing through has agreed to sell the note at $163,500 plus $2500 in earnest money. $173k refi is because closing cost are tied in. I currently owe 199k on my current mortgage and have 18.5 years left until pay off.

So if I am understanding this correctly you are refinancing a seller financed mortgage into a conventional mortgage? How would you be gaining $26k in equity? Wouldn't that just mean you are paying the $26k at closing since the loan you are paying off is more than the current loan you are qualifying for?
[email protected]818-269-7983
LuxePrivate Investments LLC 572 Reviews
Website View Page
0 Reply
Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Erik Estrada:

Quote from @Hunter Jordan:

Quote from @Erik Estrada:

I am trying to wrap my head around this. Why not just pay down your loan more aggressively? Shortening the loan term may make sense if you are going to reduce the interest rate as well. In this case, you are just getting into a higher rate and paying closing costs.

Let me add that if I pay extra on the 20 year refi I will pay it off in 17 - 18 years and my mortgage stays the same.
This is also a seller financing deal and the individual I am financing through has agreed to sell the note at $163,500 plus $2500 in earnest money. $173k refi is because closing cost are tied in. I currently owe 199k on my current mortgage and have 18.5 years left until pay off.

So if I am understanding this correctly you are refinancing a seller financed mortgage into a conventional mortgage? How would you be gaining $26k in equity? Wouldn't that just mean you are paying the $26k at closing since the loan you are paying off is more than the current loan you are qualifying for?
Yes refinancing a seller financing deal to a conventional loan. The amount owed on the seller financing note is $199k.

However he is selling the note for $163,500 plus $2500 for earnest money. So $166k total. I will be financing the $163,500 as I will pay him directly for the earnest money. The 20 year refi is for $173k (163,500 plus closing and one year of property insurance)

$199k (current note) - $173k (refinancing 20 year term note) equals 26k in gained equity.
0 Reply
Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
1y
Quote from @Hunter Jordan:

Quote from @Erik Estrada:

Quote from @Hunter Jordan:

Quote from @Erik Estrada:

I am trying to wrap my head around this. Why not just pay down your loan more aggressively? Shortening the loan term may make sense if you are going to reduce the interest rate as well. In this case, you are just getting into a higher rate and paying closing costs.

Let me add that if I pay extra on the 20 year refi I will pay it off in 17 - 18 years and my mortgage stays the same.
This is also a seller financing deal and the individual I am financing through has agreed to sell the note at $163,500 plus $2500 in earnest money. $173k refi is because closing cost are tied in. I currently owe 199k on my current mortgage and have 18.5 years left until pay off.

So if I am understanding this correctly you are refinancing a seller financed mortgage into a conventional mortgage? How would you be gaining $26k in equity? Wouldn't that just mean you are paying the $26k at closing since the loan you are paying off is more than the current loan you are qualifying for?
Yes refinancing a seller financing deal to a conventional loan. The amount owed on the seller financing note is $199k.

However he is selling the note for $163,500 plus $2500 for earnest money. So $166k total. I will be financing the $163,500 as I will pay him directly for the earnest money. The 20 year refi is for $173k (163,500 plus closing and one year of property insurance)

$199k (current note) - $173k (refinancing 20 year term note) equals 26k in gained equity.

Perfect breakdown.
Yes then I see why it would make sense for you to refi. The seller is basically discounting the original note and you are paying him off through the refinance.
[email protected]818-269-7983
LuxePrivate Investments LLC 572 Reviews
Website View Page
0 Reply
Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Erik Estrada:

Quote from @Hunter Jordan:

Quote from @Erik Estrada:

Quote from @Hunter Jordan:

Quote from @Erik Estrada:

I am trying to wrap my head around this. Why not just pay down your loan more aggressively? Shortening the loan term may make sense if you are going to reduce the interest rate as well. In this case, you are just getting into a higher rate and paying closing costs.

Let me add that if I pay extra on the 20 year refi I will pay it off in 17 - 18 years and my mortgage stays the same.
This is also a seller financing deal and the individual I am financing through has agreed to sell the note at $163,500 plus $2500 in earnest money. $173k refi is because closing cost are tied in. I currently owe 199k on my current mortgage and have 18.5 years left until pay off.

So if I am understanding this correctly you are refinancing a seller financed mortgage into a conventional mortgage? How would you be gaining $26k in equity? Wouldn't that just mean you are paying the $26k at closing since the loan you are paying off is more than the current loan you are qualifying for?
Yes refinancing a seller financing deal to a conventional loan. The amount owed on the seller financing note is $199k.

However he is selling the note for $163,500 plus $2500 for earnest money. So $166k total. I will be financing the $163,500 as I will pay him directly for the earnest money. The 20 year refi is for $173k (163,500 plus closing and one year of property insurance)

$199k (current note) - $173k (refinancing 20 year term note) equals 26k in gained equity.

Perfect breakdown.
Yes then I see why it would make sense for you to refi. The seller is basically discounting the original note and you are paying him off through the refinance.
Correct. Going back to my original post, what refi do you recommend? The 15 year? The 20 year? The 20 year and pay the same mortgage I’m paying now? ($120 additional payment added to principal).
Or do you still like the current note.

Thanks for the advice!
0 Reply
Jeremy Horton
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
1y
Quote from @Hunter Jordan:

However he is selling the note for $163,500 plus $2500 for earnest money. So $166k total. I will be financing the $163,500 as I will pay him directly for the earnest money. The 20 year refi is for $173k (163,500 plus closing and one year of property insurance)

$199k (current note) - $173k (refinancing 20 year term note) equals 26k in gained equity.
^^ This makes the OP make sense. it threw me for a loop there for a sec

Why not do a 30 year conventional?

If you can't do a 30 year, I'd do the 20 year - this gives you the option to pay down faster but leave a little extra money in your pocket each month for expenses.

Mortgage interest is deductible anyway - I'd take the extra $189/month over a negligibly lower rate
0 Reply

Ying Tang

Member since 2025 · 322 posts · 121 votes

1y

Thanks for sharing! I learned quite a bit from this post. I think refinance does make sense in your case, and I would do 20 years.

Loan 1

• Rate: 5.00%

• Monthly Payment: $1,372

• Time Left: 18.5 years (222 months)

• Estimated Outstanding Balance: Approximately $198,800

• Total Payment: About $304,584

• Total Interest (approx.): ~$105,800

Loan 2

• Rate: 6.125%

• New Balance: $173,000

• Monthly Payment: $1,252

• Time Left: 20 years (240 months)

• Total Payment: About $300,480

• Total Interest (approx.): ~$127,480

If you increase the payment on Loan 2 to $1,372 per month (matching Loan 1’s payment), you’ll be paying an extra $120 each month toward principal. Using a rough amortization calculation for Loan 2—with a new balance of $173,000 at a 6.125% annual rate (≈0.5104% monthly)—this higher payment would reduce the term from 20 years (240 months) to roughly 203 months (about 16.9 years).

In numbers:

• Original Loan 2 at $1,252/month for 240 months:

Total payments ≈ $300,480; Total interest ≈ $127,480.

• Loan 2 with $1,372/month:

Estimated term ≈ 203 months; Total payments ≈ $278,000; Total interest ≈ $105,000.

You need to double check the numbers as I'm not a loan professional. But it seems with the same amount of payment, refinance would allow you to pay off earlier..

0 Reply

Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Ying Tang:

Thanks for sharing! I learned quite a bit from this post. I think refinance does make sense in your case, and I would do 20 years.

Loan 1

• Rate: 5.00%

• Monthly Payment: $1,372

• Time Left: 18.5 years (222 months)

• Estimated Outstanding Balance: Approximately $198,800

• Total Payment: About $304,584

• Total Interest (approx.): ~$105,800

Loan 2

• Rate: 6.125%

• New Balance: $173,000

• Monthly Payment: $1,252

• Time Left: 20 years (240 months)

• Total Payment: About $300,480

• Total Interest (approx.): ~$127,480

If you increase the payment on Loan 2 to $1,372 per month (matching Loan 1’s payment), you’ll be paying an extra $120 each month toward principal. Using a rough amortization calculation for Loan 2—with a new balance of $173,000 at a 6.125% annual rate (≈0.5104% monthly)—this higher payment would reduce the term from 20 years (240 months) to roughly 203 months (about 16.9 years).

In numbers:

• Original Loan 2 at $1,252/month for 240 months:

Total payments ≈ $300,480; Total interest ≈ $127,480.

• Loan 2 with $1,372/month:

Estimated term ≈ 203 months; Total payments ≈ $278,000; Total interest ≈ $105,000.

You need to double check the numbers as I'm not a loan professional. But it seems with the same amount of payment, refinance would allow you to pay off earlier..
I appreciate your response! How do you feel about the 15 year refi?

0 Reply
Ying Tang
Member since 2025 · 322 posts · 121 votes
1y
@Hunter Jordan

• Rate: 5.75% (15-year refinance)

• New Balance: ~$173.5K

• Monthly Payment: $1,441

• Term: 15 years (180 months)

• Approx. Total Payment: $1,441 × 180 ≈ $259,380

• Approx. Total Interest: ~$85,880

Again, please double check the numbers yourself.

i actually just posted yesterday about whether to choose 15 year fixed or 30 year fixed. Everyone says 30 years in that post (or almost everyone). That does make sense when comparing 15 year and 30 year fixed.

You should check out that post too. A lot of good comments.

Now back to your question, I would probably choose 15 year, because it is really not a big difference for me for the extra $100 or so. It's a larger difference if you consider 30 year fixed (which maybe you should look into?).
0 Reply

Will Hamelton

Madison · Member since 2025 · 8 posts · 5 votes

1y

I wouldn't refinance. Wait until rates are better for sure.

0 Reply

Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Will Hamelton:

I wouldn't refinance. Wait until rates are better for sure.

Can’t wait, he needs the capital now. If I don’t jump on it then he will just go another route. Then I lose the cheaper note and 26k in gained equity.
0 Reply

Peter W.

Member since 2020 · 351 posts · 329 votes

1y

There is either a misunderstanding on my end, or on your end.

I don't understand how you have a 199k balance on your current loan and you are going to refinance to a 173k balance (without putting in the extra 26k yourself). I don't know any lender who is going to just give you 26k for taking a higher interest rate. But that is what I am reading. If that is the case, take the free money and I'd love to hear about how you negotiated this and what strings are attached (prepayment penalty?)

I suspect, your initial loan is for 199k and your balance is now 173k (although this still doesn't make sense based on the amortization calculators). In which case it makes zero sense to refinance into a higher rate.

~~So I am still not sure what to make of this. Because what I am inferring from what you wrote is drastically different from what I expect from a refinancing.~~

Totally didn't finish reading the whole thread somehow.

0 Reply

Patience EchemPro Member

Member since 2024 · 68 posts · 50 votes

1y

I don’t understand how your outstanding dropped from 199K to 173K. In both cases you are going to a higher rate which will make your payment more expensive. Except for some unexplained reason you are using a lower outstanding amount.

0 Reply

Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Patience Echem:

I don’t understand how your outstanding dropped from 199K to 173K. In both cases you are going to a higher rate which will make your payment more expensive. Except for some unexplained reason you are using a lower outstanding amount.

Note holder is selling the note at a discounted rate. Read all my posts, it explains in detail how this deal is being done.
0 Reply

Jason Smith

Member since 2019 · 2 posts · 2 votes

1y

if you are asking random people online what to do, you might want to rethink your life

0 Reply

Hunter Jordan
OP
Member since 2022 · 19 posts · 4 votes
1y
Quote from @Jason Smith:

if you are asking random people online what to do, you might want to rethink your life
Didn’t know asking people advice was such a bad thing?
0 Reply

Should I Refinance My Mortgage or Stick with My Current Loan?

Should I Refinance My Mortgage or Stick with My Current Loan?

Most Popular Reply

21 Replies