15 years at 7.5% or 30 years at 8.0%? Which one is better?

[Hong Yang]

So I'm trying to figure out the best return from these two mortgage options. Option A is 15 years at 7.5% and Option B is 30 years at 8.0%. Assuming that your monthly cashflow can cover either option, which option leaves you with more cash if you refinance at 3 years? Also, we would refinance back to original mortgage amount.

So for a 100k mortgage, you would pay $33,372.36 in cash and have a $87,849.63 balance on 15 year 7.5%. For the 30 year 8%, you would pay $26,415.36 and have $97,280.15 balance. So you would pay $6,957.00 more in mortgage payments over 3 years with the 15 year mortgage, but you would be able to refinance out $9,430.52 more than the 30 year mortgage.

Suppose we had a $2,500 refinancing cost, then the cash position is about the same at the 3 year mark if we refinance option A and choose to not refinance option B. If we had to refinance both options, then option A would be better because you would have
$2,473.52 in more cash.

From this analysis, I would conclude that Option A is just better than Option B, assuming rates do not rise. If rates stay the same, then we can refinance and get the same cash position as option B. If rates drop, then we would refinance both options and Option A would be ahead. If rates go even higher (oh boy), then refinancing is not worth it and option B would have a better cash position. However, in the scenario where interest rates go up even higher, I doubt that I would want to invest more cash into real estate. Its also unlikely that I would find anywhere else to put the extra 7k in cash from option B that has a guaranteed return of 7.5%.

Does this analysis make sense? What could I have missed?