Did you know that Mortgage Refinancing with a 15 year term length can save you $45,000 in interest charges per $100,000 borrowed? According to Freddie Mac 40 percent of refinancing homeowners are choosing 15-year term lengths over the traditional 30-year fixed-rate mortgage. While it’s true your monthly payment will be higher, the long term benefits of a 15 year mortgage are immediately obvious. Here’s an article by Dan Green of the Daily Mortgage Reports with several reasons for considering 15-year refinance mortgage rates from the best mortgage companies like Amerisave for your next home loan:
The 30-year fixed rate mortgage is less popular among refinancing homeowners. Record-low mortgage rates are drawing refinancing households into shorter-term fixed-rate product such as the 20-year fixed-rate mortgage and the 15-year fixed-rate mortgage.
As Dan points out you’re trading a higher payment amount for a shorter term length meaning you’ll pay down the principle balance much faster while stuffing less cash in your lender’s pockets over time. How much higher? On average your monthly payment will be 48% higher when mortgage refinancing with a 15 year term length over a traditional 30-year, fixed-rate mortgage.
This might seem like a lot; however, when you put it in perspective with how much you’ll be saving in just 15 short years, the difference is mind-boggling. Based on today’s refinance mortgage rates you’re literally saving $45,000 for every $100,000 you finance with a 15 year term length instead of the traditional 30-year fixed.
As with any home loan the test of how good of a deal comes not just from how low your interest rate is but how much you’re paying for closing costs like the loan origination fee. If you’re not able to recoup your out-of-pocket expenses (how do you break even when your payment goes up?) then you’re losing money no matter how low the refinancing rates.
Lowering your payments is a great reason for mortgage refinancing and it’s very easy to calculate how long it’ll take to recoup your closing costs based on the monthly savings. If you elect mortgage refinancing with a 15-year term length and the payment goes up it’s more difficult to calculate the break-even point. Closing costs become less of a factor with a 15-year mortgage because the long-term savings are so dramatic; however, it’s still cash out of your pocket that you’ll have to pay to secure the loan.
You can learn more about paying less for your next home loan by avoiding unnecessary fees and markup by checking out my free Underground Mortgage Refinancing Videos.