Does it make sense to refinance my home for 30yrs vs. 15yrs if I plan to sell within 5-10yrs?

[Anonymous]

I'm in a situation right now where I can refinance my home to get a lower interest rate and remove PMI. My current loan is a 30yr fixed @ 4.2%, and my monthly mortgage is $1624/mo. My new re-fi loan could either be a 30yr loan @ 3.625% no points which would lower my mortgage payment to $983/mo. A possible savings of around $400+/mo. once taxes are included. Or a 15yr fixed loan @  2.75% with 0-points. My mortgage would be $1463.

I was really convinced that the route to go was to refi for 15yrs and pay off my mortgage faster, and have no house payment once I retired (43yrs old now). However, after much thinking, there's a great possibility that we could sell our home. The main reason we would sell our home would be to get into a one story vs. the two story home we have now. Its all a matter of preference. We love our current home, but if the market is good, and we have an option to buy a single story home and matches are needs, then why not? So, would it make sense to refi for 30yrs, remove the PMI, and take advantage of all those savings? Why would I refi for 15yrs, save less than $200/mo if I planned to sell? I'm curious what everyone's thoughts  are and what the best ideal solution is for me. Thank you all in advance!

[StartingOver10]

It is a personal decision.

You might want to go to bankrate.com and input the relevant figures for both the 30 year and the 15 year loans so you can see what the remaining balance on your loan is in year 5 or year 10 and calculate the equity you would have to move to the new property at that time. You will need to see the amortization schedule. It will show you the interest paid and show you how much interest you save too.  At least you will have a much better idea of which direction to take once you see the extra equity you would have with a 15 year. 

It is possible to also take a 30 year loan and then pay an extra payment each year toward the principal (pay with a regular payment) the see where you will be in 5 year increments. Rule of thumb is one extra payment toward principal every year (on a 30 yr loan) saves you 7 years of payments. You can get more exact figures at Bankrate.com using their mortgage calculators.

[Anonymous]

Thank you StartingOver10! I will begin doing what you suggested.