I have a 20-year fixed rate loan with 9 years left. I owe $91K. My interest rate is 5.625. Zillow zestimate of current home value is $205,500.

I would like to refinance to a lower interest rate with a 5-year fixed mortgage. Does this makes sense financially? Is there a mortgage company that offers a 5-year fixed?


There are banks that will do 5-year fixed. Alternatively, if you pay off a 15-year mortgage as if it were a five-year fixed, with the extra money going to pay down principal, the cost isn't very different and you have more safety buffer. Talk to banks about options, or find a mortgage broker who'd be willing to research this for you.

Just to point out an alternative: refinancing at lower rate but without shortening the duration would lower your payments; investing the difference, even quite conservatively, is likely to produce more income than the loan would be costing you at today's rates. This is arguably the safest leveraged investment you'll ever have the opportunity to make.

(I compromised: I cut my term from 20 years to 15ish, lowered the interest rate to 3.5ish, and am continuing to let the loaned money sit in my investments and grow.)

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    Or you might get a 15-year ARM, with the rate fixed for the first 5 years... – jamesqf Jul 22 '15 at 5:22

One thing I would look into is getting a fixed rate home equity loan for a short term. Not a line of credit, but a home equity loan.

The main benefit is they typically offer no closing costs. You can get a very low rate provided you move the loan into first position (replace your current mortgage).

I know someone who got a 7 year fixed Home Equity Loan, from Regions Bank, for 2.62% no closing costs.

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