30-year of 15-year Refinance

[Michelle Santiago]

Hi BP Masterminds :)

My husband and I will be refinancing our first rental property. However, we are not sure if it makes sense to do a 30-year or a 15-year mortgage. We really like the idea of owning the property outright in 15 years and paying less in interest long-term. But, obviously that means less cash flow (current PITI= $990 and rental income + $1250, not impressive - I know - but it was our first). Plus I'm not sure if this particular property is worth paying off since it is an older home. We also plan to buy our 4th property in the next 3-5 years and think that having a higher cash flow will be better in terms of getting a 4th mortgage.

We would love to hear your thoughts on this. What would you do? What other factors should we consider? We are fairly new at REI, so your generous advice is greatly appreciate it. Here's the info that I got from the mortage broker....

If we did the 30 year refinance the rate today would be at 3.50% with .125 in pts to get there, if we don't roll in the .125 then the rate jumps to 3.75%. The payment on the 3.50% would be est at $772 per month which will save you $217 in monthly payment and if I put your current loan side by side with this loan your interest savings over the term would be est $50,349. To give you an idea of the importance of staying at the 3.50% with the .125 pts, if we went to the 3.75% the payment is $787 but the interest difference saves you $8026 ( the .125 pts rolled in is only $136 in order to save $8000 in the long haul)

You could also do the 15 year. The rate would be at 2.75% today with 0 points to get it and the payment would go up to $1021 per month which is an additional $30 per month but the kicker is that your interest savings side by side jumps to $119,915 by cutting off the years. Think of it this way, by cutting off 11 years of your loan you will have $130,680 less money you will even send to the bank over that term.