Refinancing is a hot topic among homeowners as mortgage rates fall to the lowest levels in history amid the economic chaos caused by the Coronavirus. If you think you're due for a refi, you obviously want to find the lowest mortgage rate— but you also should give some thought to your Loan Term.
The 30-year fixed-rate mortgage gets all the attention because it's America's most popular type of home loan, and maybe that's what you currently have. But if you've been in your home a few years, refinancing into a 15-year mortgage can keep you from dragging out the debt and your interest costs. The loan comes with lower interest rates than 30-year mortgages, but the monthly payments are higher.
PROS of a 15-year Mortgage
Refinancing from a 30-year fixed-rate mortgage into a 15-year fixed loan can help you pay down your mortgage faster and save a ton of money on interest, especially if rates have fallen since you bought your home.
The shorter mortgages tend to have lower interest rates, and this means more of your payments will go toward the principal balance of the loan.
A 15-year mortgage can be a good move for many homeowners, but it has some drawbacks. For starters, your monthly payment will likely increase because you’re compressing the repayment schedule into a shorter time frame. That means you’ll have less cushion in your monthly budget, especially if you’re on a fixed income.
For candidates who have sufficient cash flow, this move can be advantageous, despite the higher monthly payment. Good candidates include homeowners who have been in their homes for several years and have a monthly budget and income that permit the higher payment, without cutting things too close.
Before you refinance into a 15-year mortgage, contact me and I will work with you to determine the best solution to meet your goals.