Wondering about refinancing your 30-year mortgage into a 15-year option? That answer may seem simple and obvious. Why not reduce your mortgage term to pay it off faster and receive the benefit of lowering the interest rate at the same time? Before making a quick decision to refinance your mortgage, Honor Bank has all the details and key factors to consider when making this big decision.
Mortgage rates since the end of 2017, especially this June, have risen. Nationally as of June 22, 2018, the average 30-year Fixed rate is 4.625% while the 15-year fixed rate is at 4.00%. Rates very from state to state, and are affected by the financial market performance, credit score, equity in your home, loan mount, loan term, interest rate type, loan type, and in some cases the type of home you presently reside in. Rates are still historically low.
The interest rate difference presented doesn’t seem like a lot, however the lower interest rate and shorter repayment term will result in much less interest paid over time.
Consider these key questions when refinancing from a 30-year to a 15-year mortgage.
- What flexibility do you have in your financial budget? The increase in your mortgage payment will pay off your mortgage faster and save money. Make sure the new payment will not cause strain to your financial means by the increase in payment. You may have other debts you’re paying on that you need to consider.
- What time do you have left with your present 30-year mortgage vs. the time to a new 15-year mortgage? As an example, you may have had your present mortgage for 7 years and now have 23 years left at an interest rate of 4.875%. This means you would save 8 years of interest payments compared to what is left with a new 15-year mortgage at 4.25%. You would save in this case $51,313 in interest with a loan amount of $165,000 over 15 years.
- When should I refinance from a 30-year Mortgage to a 15-year mortgage? The typical rule of thumb is that if you can reduce your current rate by 0.50% to 1% or higher, then it might make sense to consider a refinancing move.
Lowering the rate and repayment term can save you serious cash over the life of your loan. This is what makes refinancing to a 15-year mortgage make sense. At Honor Bank we have a mortgage expert team, that can review your present mortgage terms left vs. a new 15-year mortgage. We want your lending experience with us to be “seamless” and provide much value to meet your financial goals.
Should I Refinance My Mortgage? Use our refinance calculator to analyze if refinancing makes sense to you.