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CFP® Practice Question of the Week: Mortgage

A CFP® professional meets with two new clients who would like advice about their mortgage. In the review, the CFP® professional finds that their essential expenses exceed their income. Mortgage rates have come down significantly and they intend to refinance their current 30-year mortgage to a 15-year mortgage. Their payments will be higher than their current payment. However, they will pay off the mortgage 5 years earlier than the current amortization schedule allows. What should the CFP® professional do?

  1.    Suggest they stay with their current mortgage, as the higher interest is tax deductible
  2.    Suggest they refinance to a 30-year fixed mortgage and begin funding savings
  3.    Suggest they refinance to the 15-year mortgage, which would reduce the amount of interest paid over the life of the loan
  4.    Suggest they meet with their mortgage broker