If you originally took out a 15-year mortgage, but the payments are difficult, refinancing a 30-year loan can reduce your payments by up to several hundred dollars per month. When refinancing 15- to 30-year mortgages, it will take you about twice as long to pay off the loan. Unfortunately, that doesn't mean your payments will be half the cost. The interest you pay for the late payment of principal will result in a higher total payment on your loan.
However, payments are likely to be reduced, often by several hundred dollars. If your goal is to pay off your mortgage faster, you can do so by making regular additional payments on your current mortgage loan. Refinancing a 30-year fixed-rate mortgage to a 15-year fixed loan can help you pay off your loan sooner and pay considerably lower interest. Refinancing can be an excellent financial measure if it reduces your mortgage payment, shortens the term of the loan, or helps you accumulate capital more quickly. Refinancing to change the term of the mortgage can affect your finances, whether you're thinking of shortening the duration of your loan from 30 to 15 years or extending it in the opposite direction.
These homeowners may justify refinancing on the grounds that remodeling adds value to the home or because the interest rate on the mortgage loan is lower than the rate of money borrowed from another source. A 15-year mortgage can help homeowners build up capital more quickly, pay off their mortgage sooner, and pay less interest over the term of the loan. Since refinancing can cost between 3% and 6% of the principal of a loan and, like the original mortgage, requires an appraisal, the search for securities and application fees, it is important for the homeowner to determine if the refinancing is a sound financial decision. While the above-mentioned reasons for refinancing are all financially sound, mortgage refinancing can be a slippery slope toward never-ending debt.
