Right now 30 year refinance rates are around 4.00% while 15 year rates are 75 basis points less at 3.25%. You can even find lenders who will give you a 15 year rate as low as 2.75% when you’re willing to pay points. Mortgage points allow you to “buy down” the rate on a loan. 1 point is equal to 1% of a loan and you pay it upfront. Points can also be rolled into a loan.
The only drawback to a 15 year loan is you’ll have higher monthly mortgage payments. If you can afford the payments on a 15 year loan you should go ahead and take the plunge.
I recently refinanced a $300,000 loan from a 30 rate of 4.875% to a 15 year loan at 3.25%. Using a mortgage calculator I realized I’m going to save $136,167 in mortgage interest with a 15 year loan, plus I’ll own my home in half the time! Again, the only negative is my monthly mortgage payments are higher but I can afford higher payments.
I figured I’m also better off paying down my loan instead of saving the money in an account since the best CD rates (12 months) and savings rates are around 1.00%.
When I refinanced I had an option of a 30 year loan at 4.00% or a 15 year loan at 3.25%. Here are the numbers on a $300,000 loan:
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$300,000 loan at 4.00% for 30 years
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$300,000 loan at 3.25% for 15 years
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As you can see my monthly payments are higher at $2,108.01 with a 15 year loan instead of payments of $1432.25 with a 30 year loan. The interest savings on a 15 loan come to $136,166.24! Making refinancing to a 15 year loan a no brainier!
You can use our free mortgage calculator to see how much money you’ll save refinancing to a 15 year mortgage loan.
