15 or 30: Which way would you refinance your mortgage?

[Travis L.]

BP Community,

I could really use some advice on the best course of action for my personal home.

My wife and I are in the process of refinancing our house with the goal of obtaining a conventional loan and avoiding paying Mortgage Insurance (original FHA Loan with a 4.75% rate). Due to not having sufficient equity, we are able to obtain a lower rate and will even save some money on MI; paying a reduced MI unless we bring money to closing.

Here are the stats:

Current payment and rate: $1,807.23 w/4.75% rate

30 years at 4.25%: Savings of $230 monthly with MI

15 years at 3.5%: $1,868.83 (w/MI)

15 years at 3.625%: $1,821.84 (w/MI financed)

We can comfortably pay our current mortgage amount as well as the 15 year options, though part of our reason for refinancing is to enable us to eventually move and rent out this property (better cash flow), however now I'm considering is there more benefit in doing a 15 year and building more equity that can later be used to do a cash out refi or HELOC?

I have to have an answer by tomorrow morning so all input would be appreciated:)

Travis 

[Kelly N.]

Why not do the 30 year and make payments on it as if it were a 15?  That gives you the option of lower payments later when you rent it out, plus lower yearly debt payments mean that you can borrow more when you go to buy another property!

We did the 15 year option when we refinanced, which is nice since we got the lower rate and it will be paid off in 15 years, but it did make it harder to borrow more money since our payments were higher.

Just my 2c.

Kelly