Why You Should Refinance to a 15-Year Mortgage
With any long-term investment, getting the best value for your money is key to your financial well-being. When you choose to refinance to a 15-year mortgage, the expected savings should be a major factor in your decision.
There are plenty of other reasons why you might consider refinancing:
- You have built up a substantial amount of equity and want to use it toward paying down on your loan.
- You want to pay off your home faster.
- You are interested in changing your loan term, based on your financial situation.
If you are a well-qualified buyer and want to get the best possible rate, see why refinancing to a 15-year mortgage is the right choice for you.
What Happens When I Refinance to a 15-Year Mortgage?
Interest rates remain historically low, which is why now is a great time to make changes if you have the ability to meet a few financial requirements.
Refinancing to a 15-year mortgage means your loan payments will be restructured, generally from the lower monthly payment attached to a 30-year mortgage. Although you will pay more per month, the total amount of payments you make will decrease, saving you more money over time.
Additionally, refinancing often includes the payment of closing costs and various fees, with the long-term savings still outweighing those up-front payments.
Let’s take a look at an example:
You have currently paid 10 years into your 30-year mortgage of $200,000, with 20 years left. $155,000 is your remaining balance, and you have an interest rate of 3.5% with a monthly mortgage payment of $898.
When you refinance to a 15-year mortgage, you are offered a lower interest rate (2.5%) to pay the remaining balance of $155,000 with a $1,034 monthly payment. You’ll also pay around $3,000 in closing costs or 2% of your loan, along with any additional fees.
While your monthly payment increases, long-term savings include:
- The cost of the refinance and closing costs, which you earn back in under two years.
- Just under $30,000 in interest that would have been paid with a 30-year mortgage.
You will also build equity faster with the 15-year mortgage. You may pay more per month and during the initial refinance, but you will pay less in the long run.
Do I Get Better Interest Rate When I Refinance to A 15 Year Mortgage?
While there is no set plan that applies to everyone, your savings heavily rely on credit score to obtain receiving a low interest rate on your mortgage.
These percentages are constantly changing, but 15-year refinance rates have generally held steady between 2% and 3%, since early 2020. Choose a lender who offers great rates. You will pay substantially less interest with a lower rate that is locked in for the remainder of your new term.
How Do I Qualify?
We’ve shown how you can save if you earn a lower interest rate, but what it does it take to qualify?
Begin by asking yourself these questions:
- Do I have a good credit score?
- Do I have a lot of outstanding debt?
- What amount of money (my remaining balance) am I borrowing?
Once you have answered each question, talk with a qualified lender about refinancing to a 15-year mortgage. They will help you determine how you can save more with a plan that fits your current financial goals.
Who Will Help Me Benefit?
TheBestMortgageRate.com is Florida’s premier online mortgage lender. We specialize in lending to well-qualified buyers and our team is known for providing the best mortgage rates to those who meet the requirements.
Talk with our lenders to earn unparalleled cost savings. When you refinance to a 15-year mortgage or obtain a new 15-year mortgage, you’ll have access to the lowest interest rates available, and we’ll work with you every step of the way.
Ready to get started? Apply now for a mortgage or refinance today.