Well the weekend went by and I was trying to do the numbers. If we go with the Wells Fargo Loan a 30 year loan would be 6.75% vs 7.75% to stay with Citibank. That is a difference of about $1000 in Year 1. Given our cost to obtain the loan - about $2000 it would take 2 years for that expense to pay itself back. I also had a conversation with my girlfriend. This is a property that we want to hold on to. "Hypothetically" speaking IF we were to rent out the place we would get $1250 per month. When you subtract out property taxes and HOA dues you are left with about $850 per month. The property is located in a very desirable resort like setting close to San Francisco. We are not going to sell this property in any foreseeable future.

We made the decision that we would look to pay this off as quickly as possible so we mentally decided to go with a 15 yr fixed option as this was the lowest interest expense. Of course it meant a higher payment - at about $871 vs $648 per month. However, given our "hypothetical" rent scenario we decided it would be okay for us to forego the extra $230 in payments.

There is a very important distinction to be made between expense and payments in the mortage world. Expense is gone - it is the interest you pay to the lender. However the payment includes not only the interest but also the principal. The principal is what allows you to draw down the loan balance and eventually own the property debt free.

Please see the article in: http://bestpickhomeloans.com/getting-started if you need more explanation of this.

We decided that at some point in our lives we could make this our retirement home and in that case it will be nice to not have to make any payments for the mortgage - 15 years allows for a easy early retirement in our case!