Our mortgage company sent us another offer to refinance. They claim because there was a recent government policy which allows people who have paid their mortgage on time each month, but owe more than their home is worth to refinance their home without cost. So according to the letter we received in the mail, there would be no cost for us and no appraisal. After a quick discussion with my husband, we decided to go for it. Up until recently, I had thought I wanted a 15 year mortgage with a slightly higher payment. However, it is also nice to at least have the option to only be obligated to pay a lower amount in case our finances ever take a turn for the worse. We can still pay extra on it in order to pay it off early. I think we could have gotten a lower interest rate at 15 years, but in this particular offer they only gave us 2 options: 30 years or 25 years. Both options were 4.5% which honestly isn't great considering I've seen some offers below 4, but it's better than the 5.75% we are paying now. We decided on the 25 year mortgage (which would actually take off almost a year off our current since we are just over 4 years into it). Here is math to show how this should benefit us:
Current mortgage: $1,133.01 for 25 years 11 months (311 months)
Proposed: $1,017.59 for 25 years (300 months)
Total payments of our current mortgage vs. the proposed new mortgage:
Current: $1,133.01 x 311 = 352,366.11 total payment
Proposed: $1,017.59 x 300 = 305,277.00 total payment
Savings: $47,089.11 (or approximately 20 months of my income - before tax!)
So now we are just waiting for them to get back to us in order to take the next step. Hopefully we don't get our hopes up like last time.