Refinancing at a ten year term fixed mortgage while only having six years left on current mortgage

Jerry from Orlando, Florida has a 7.25% mortgage and only has six years left. He wants to know if he should stick out the higher interest rate or refinance at a lower rate for a ten year term? Jerry is calling to ask Robert Palmer his advice on the situation.

To see if it would be worth it to refinance, the first thing to look at is the upfront cost. Since there are so few years left there is not a lot of time to recuperate the upfront cost. A recommendation would be finding a lender that can offer a no closing cost refinance. In certain situations a lender, like RP Funding, can offer to pay the closing cost in turn for a slightly higher interest rate. Even though it would be a higher rate it will still be a lower interest rate than the 7.25%. Having the lender pay the closing cost, florida taxes and title fees, can be beneficial in the fact that you are not adding anything to the balance of the loan. When refinancing with a ten year term your monthly payment will decrease, but you do have to option to continue to pay a higher payment and get the loan paid off in a shorter time frame. The key is going to be not adding any cost to the balance. Paying off the loan sooner can also save you even more money on interest. An alternative could also be that with the lower monthly payments you could free yourself up financially to other opportunities and use the extra cash to do things that may have not been an option before.