Refinance or not?
DH and I are currently 4 years into a 15-year mortgage at a good rate (5.38%); we've owned our house for almost 8 years and refinanced almost 4 years ago. We also have a HELOC with a balance of a little under $30k (the loan was used for real estate-related expenses). The balance on the first mortgage is about 40% of what the house is currently worth (i.e., the real estate boom increased the house's value considerably). We're putting the maximum into retirement accounts, and we have no debts and enough to pay all our other expenses, but we're rather close to the edge in the sense that we aren't able to save any additional. We do have a money market account with about 3 months of expenses in it, but that's it for ready cash.
We've been thinking about refinancing to a 30-year mortgage and using the difference between what we're paying now for both loans and what we would pay after refinancing to build up our cash reserves and to invest. After 11 years, we'd have a good cushion and would still have paid off a good chunk of the new mortgage. If we stick to the current situation, in 11 years we'll have a paid-off house but no money (except for the retirement accounts, of course). I expect that we may even sell the house by then, though we don't have any concrete plans along those lines yet.
Is there anything wrong with this plan? Any pitfalls that I haven't thought of? DH and I are both nearing age 50, both employed full time, and have no children.
Thanks for any thoughts.