Refinance To A 15 Year Mortgage
Homeowners may decide to refinance their mortgage because of a change in their financial situation or a myriad of other reasons. A common example of this is the case of a homeowner who, due to higher than expected expenses or preference, has found it necessary to extend his or her mortgage term to the maximum of 30 years, with few exceptions. If interest rates drop or equity has increased in the property since that homeowner first took out the loan, they may choose to refinance into a 15-year term.
When a homeowner decides to refinance to a 15-year mortgage, they potentially benefit in a number of ways. First, the homeowner should pay less in interest payments than he or she would with a 30-year mortgage at the same interest rate and loan terms. The monthly payments will be lower because there is less time left on the loan and that takes away some of the loan's length factor advantage over other types of loans, or in other words multiply the term left, or months of payments left, by the required mortgage payment. Second, it may be possible to use the money that would have been paid toward interest to pay down the principal instead, which in turn may increase the homeowner's equity.
However, there are some potential downsides to consider before deciding to refinance to a 15-year mortgage. The biggest downside is that you are refinancing to a shorter term, which means more commitment in regards to payment. If interest rates begin to climb, it may be more expensive for the homeowner to refinance again if they want to go back to a 30-year mortgage. However, the payment may still be lower overall even though you could potentially pay more in overall interest if you were to refinance from a 15 year to a 30 year.
If you are considering refinancing your home and you need some guidance, get in touch with MortgageQuote.com. We can help you with your application and find options for you to choose from, as ultimately you get to choose what the terms are that you qualify for.