If you're a homeowner and want to liquidate your home sooner, refinancing may even allow you to change the term of your loan from a 30-year loan to a 15-year loan. It may be wise to refinance for a shorter term. 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. You'll own your home completely and you'll be free of mortgage debt much sooner.
In addition, mortgages with shorter terms tend to charge lower interest rates. As a result, more of your monthly payments will go toward the principal balance of the loan. Since mortgage rates are reaching historic lows, it may be tempting to consider a 15-year mortgage instead of one that covers 30 years. Switching from a 30-year mortgage to a 15-year mortgage often, but not always, means your monthly payment will be higher.
It depends on how much you still owe on your current mortgage and the difference in rates between your current loan and your new loan. Refinancing your mortgage is a great way to lower your monthly payment while maintaining your interest rate and avoiding refinancing fees. Mortgage rates are rising, so refinancing may not be a good option for those who have already set a decent rate. Refinancing a shorter mortgage can save you money and pay off your debts faster if you can pay the higher monthly payment.
If refinancing a 15-year mortgage gives you higher monthly payments, you won't have as much financial flexibility. A 15-year mortgage can help homeowners build up capital faster, pay off their mortgage sooner, and pay less interest over the term of the loan. Refinancing a 15-year mortgage often involves making a higher monthly payment, so you'll have less cash available each month. If your goal is to pay off your mortgage faster, you can do so by making regular additional payments on your current mortgage loan.
When you refinance a 30-year mortgage for a lower interest rate, you can also choose a new term, meaning the number of years you'll have to pay off your mortgage.
