"When I refinanced a couple years ago, I actually stretched my term back out to 30 years (I know, sounds counterintuitive)."
I get where you're coming from—I did something similar myself a while back. Initially, it felt weird going from 15 years back to 30, but honestly, the freed-up cash flow was a game changer. Allowed me to jump into a small development project I otherwise wouldn't have had liquidity for. Paying off your home quicker is comforting, sure...but sometimes flexibility trumps comfort financially speaking.
I can see the logic behind extending the term, especially if you have a clear plan for the extra cash flow. Personally, I've always been cautious about refinancing back to a longer term because it can feel like resetting the clock on your mortgage. But as you pointed out:
"sometimes flexibility trumps comfort financially speaking."
That's a fair point. If you're disciplined enough to put that freed-up money into something productive—like your development project—it can definitely pay off. I refinanced once myself, but I kept the term the same and just lowered the interest rate. It didn't free up as much cash flow, but it felt safer to me at the time. I guess it really boils down to your risk tolerance and what opportunities you have lined up. If you're confident in your investment plans and have a solid exit strategy, refinancing to extend the term can make sense. Just make sure you're not stretching yourself too thin...
Yeah, I totally get your point about refinancing feeling like you're resetting the clock. When I refinanced a couple years back, I went for a slightly longer term to free up cash for some home improvements. At first, it felt risky, but honestly, having that extra breathing room each month was a lifesaver. As long as you're disciplined about using the extra money wisely (and not just splurging on random stuff), it can be a smart move. Just gotta know yourself and your spending habits...
I see where you're coming from, and it's definitely great that refinancing worked out well for your situation. Having some extra cash flow each month can really ease financial stress, especially if you're disciplined enough to put it toward something meaningful like home improvements.
That said, I tend to caution people a bit when they're considering extending the loan term, even slightly. While lowering monthly payments feels like immediate relief, it usually means paying more interest over the life of the loan. I've seen cases where clients refinanced multiple times, each time stretching their mortgage back out to 30 years, and ended up paying significantly more overall—even though their monthly budget felt easier.
One approach I sometimes suggest is refinancing but keeping the same or shorter term if possible. If interest rates have dropped enough, you might still lower your monthly payments without extending the loan length. Or, if you can comfortably handle your current payments, refinancing into a shorter term could save you tens of thousands in interest over the long haul. It's about balancing immediate comfort with long-term financial health.
Also, something to consider is the closing costs associated with refinancing. Depending on how long you plan to stay in your home, those fees could offset any short-term savings. A good rule of thumb is to calculate your "break-even point"—how long it'll take for your monthly savings to cover the upfront costs. If you're planning to move in a few years, refinancing might not make sense financially.
Ultimately, it really comes down to your personal goals and comfort level. If freeing up cash flow is critical right now, refinancing to a longer term might be justifiable. But if you're financially stable and aiming for long-term savings, maintaining or shortening the loan term could be a smarter move. Just something to keep in mind as you weigh your options...
"Depending on how long you plan to stay in your home, those fees could offset any short-term savings."
This is a really good point. I've had clients who jumped into refinancing because rates looked attractive, only to realize later they didn't stay long enough to recoup the closing costs. It's easy to overlook that break-even calculation. Curious if anyone here has actually done the math on their own break-even point and found it surprising...?
