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About 5 years ago I still owed $140K after paying on our Mortgage for 5 years we only paid less than 20K on Principal.
So we started throwing an extra $2K a month at the mortgage. Instead of just paying the $1400 to $1500 a month(depending on escrow), we decided, many people are paying $3500 a month for Rent or Mortgage. So we decided to just pretend our Mortgage was $3500 a month.

We just got the payout letter a few months ago. Done and out. Best $2K a month I ever spent. Now we don't have the Mortgage or the $6K a year for insurance.
We got hit with hurricane damage several years back. And it took the insurance company over 2 years to fix our roof. We're going to squirrel money away, and next time we have hurricane damage, we'll have our roof replaced the very next week out of pocket. The homeowners insurance is a scam, and complete waste of money.
They were happy letting my house rot away while they slow rolled my claim.

I don't know your full situation but option 1 would be my choice.. where are you getting such good rates?

I also would go for completely paying off all debt if you would still have that six months of rainy day funds and a solid job. But that's me. I hate debt.

Once paid off, take everything you would have paid on the mortgage and save it to quickly get into a position of several years of rainy day funds without having to refi.

What's the worst that can happen in any direction? If you hold the equity portfolio, stocks could crash, or surge more. If you sell stock, you've got the certainty of the house.

The answer may be different depending on how long s/he plans to live in the house, and, if it's in California, whether it has a low Prop-13 property tax assessment.

I admit that's an unusually low interest rate, I just don't like paying interest at all, ever, unless it's to grow a business.

And if they are about to leave, right, it may not make sense to pay it off before then.

If they are not going to leave because they want to keep the Prop-13 push of their actual property tax onto other people, then maybe they should pay it off.

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I am sorry correction for 550k loan 1.99% option is for 15 years and not 30 yrs but it’s still best .

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BACAH

I plan to live in same home for next 10/15 yrs if my situation permits as I love Bay Area and I do not have billion $ to worry about tax plan to move to Austin like Elon Musk 😜

Hard to help without knowing the quoted monthly payments for options 1 and 2, and what your current monthly is. If you're not getting a big savings in the monthly payment or it's minimal (probably higher with the 15yr) I'd probably stick with the status quo. Keep the money invested and pay down extra principle each month on the mortgage.

You also said you just refi'd Aug. 2019 if I'm correct. You're still in the red on that one for sure with fees unless you were coming from 4% down to 2.75%. Like I said, don't know the full situation, but you can pay off a 30 year that makes it look better at the end of the loan than the actual 15 year at 1.99%. Just takes discipline. If you also hit a rough patch you can always skip the extra principle payment and pay the minimum or normal amount that month(s).

WookieMan says

If you also hit a rough patch you can always skip the extra principle payment and pay the minimum or normal amount that month(s).

Yep, this is a solid reason to not go 15.

WookieMan says

Hard to help without knowing the quoted monthly payments for options 1 and 2, and what your current monthly is. If you're not getting a big savings in the monthly payment or it's minimal (probably higher with the 15yr) I'd probably stick with the status quo. Keep the money invested and pay down extra principal each month on the mortgage.

You also said you just refi'd Aug. 2019 if I'm correct. You're still in the red on that one for sure with fees unless you were coming from 4% down to 2.75%. Like I said, don't know the full situation, but you can pay off a 30 year that makes it look better at the end of the loan than the actual 15 year at 1.99%. Just takes discipline. If you also hit a rough patch you can always skip the extra principal payment and pay the minimum or normal amount that month(s).

WookieMan & All
My Current Loan situation: I refinanced Aug '20 for 2.75% my monthly is $3,072 down from 3.625% ($3,480) Refi in June 2019 was down from 4.125% ($3,780) from Sept 2018.

If I go for
Option 1: 1.99% for 15 yrs then my monthly will be $3,537 but will have to pay a huge amount to bring down my loan amount to 550K.
Option 2: 2.50% for 30 years with the current Loan amount, my monthly will be $2,952
Option 3: 2.375% for 30 years if I pay off some principal (30/40K) to bring it down to my 60% Loan to value than my monthly will be $2,682

I’m not sure it makes sense to refi at all. The one rate (2.5%)will save you less than $100/month from your current payment and you’ll be out of pocket the closing costs and other expenses to give them the impound. It might take a couple years just to equal out to where you are now financially.
If you go with the 15 year option, I expect the goal will be to pay it off fast. That’s laudable, but honestly you don’t have to refi to do that. As 10lbbass said, you can drop an extra thousand on your mortgage any time you want to. So why commit to it? Your six month reserve for bad times needs to be that much larger for the 15 year option that would cost $600-700 more a month.
Oh but what’s that? You’ll also have to deplete your emergency reserve to do that? No thanks. The money you have invested is far more fungible and easily accessed than home equity, should you need it. And you might! If 2020 has taught us anything it’s to expect the unimaginable. And emergency reserves of hefty quality are the way you survive the big pitfalls of life.
I hear the Bay Area is bleeding tech anyway. If that keeps up and you’re a tech worker, you might soon find yourself in the position to have to make a move across the country. Then you sell that house and pay the tax on your equity... equity that’s your money you put into that house.
So you could argue that the money you’d have to get from sale of your other assets will be taxed again later if you park it in your home.

Anyway I would advise a holding pattern. You don’t need to refi right now. Your payment is affordable and your life is on track. Take advantage of that and squirrel away cash and investments to increase personal wealth.

Thank you Shaman . Just FYI all my loans so far have been no closing cost , I did not pay single $ for refi in the past or in the future but like your perspective of keeping cash and payoff extra monthly with 30 year loan rather than commuting to 15 year tenure . It will also give me some liquidity to dollar cost average in stocks which tend to give better returns if you hold long term.

Shaman says

I hear the Bay Area is bleeding tech anyway. If that keeps up and you’re a tech worker, you might soon find yourself in the position to have to make a move across the country

My vote is with Shaman. As the area bleeds tech workers, so will it bleed service industry workers who service their tech industry customers. Cash Is King, as it's said.

I would not sell equity (stocks/stock mutual funds) shares to do anything except retire.

clambo says

I would not sell equity (stocks/stock mutual funds) shares to do anything except retire.

Not even to harvest some tax losses?

I am inclined to go for Option 3 as $2682 is in my sweet spot and than follow Shaman advice to keep paying extra to payoff the loan quicker . Reason for Option 3 I made some profit in stocks, and stocks being all time high can afford to book some profits rights now and invest in assets which is going to go up in next few years, thanks to covid and stock market boom the residential real estate will stay strong till Fed starts increasing interest rates by 2023.. I will update this thread on what I decide thank you all for your response and sharing your wisdom .

Tix2fun says

I did not pay single $ for refi in the past or in the future

It's in there, trust me. It's a marketing ploy. They just added their fees to your loan principle along with appraisal and other small fees. You just didn't pay for it out of pocket cash or check at closing. It's not a ton of money, but depends on the loan size. Could be $1,500 or as high (or higher) than $3,500.

You're basically amortizing that over the life of the loan or until your next refi. It's not a big deal as there would be no market for refi's for a lot of Americans if they had to come out of pocket for it. Most people choose the no closing cost option. If you had an appraisal, the bank loaning you hundreds of thousands didn't pay for that out of the kindness of their heart. And your mortgage banker/broker/lender didn't gather all those documents and coordinate everything for free.

How long before that spammer will chime in on how Crypto Currencies have something to do with Tix2fun's question?

Your interest rates are already lower than inflation. In these troubled times, I would stay liquid and defer refinance shell games altogether. Besides, if inflation goes bonkers, your debt will drop like a rock in terms of actual monetary value.

Those rates are nice. Its a no brainer to refi if you don't have to bring money to the table upfront. Why care about refi costs if they are built into a rate that is lower than your current rate.
I like option 3. By paying down 40k you would need to calc. your opportunity cost. Is your 40K times expected return minus taxes less than the savings from the refi than go for it.

BACAH I have no tax losses to harvest except WFC which I inherited.

I’m going to wait to see if or when it’s up to my basis from 2017.

In another year I might change my tune and sell some WFC because I hate seeing it on my Vanguard page with everything else.