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Perks of Refinancing to a 15-Year Mortgage

A 15-year mortgage is the dream home loan for buyers who can afford higher monthly payments and want to pay off their mortgage in half the usual time. A 15-year timeline can save thousands or even tens of thousands of dollars in interest.

To make a 15-year fixed-rate mortgage work, you’ll need a reliable income and enough money left after your monthly payment to cover expenses, savings and emergencies.

What is a 15-year mortgage?

A 15-year mortgage will be paid off completely in 15 years if you make all the payments on schedule. These mortgages typically have a fixed rate, which keeps the principal and interest rate the same for as long as you hold the mortgage. Your taxes and insurance costs can change, though.

Benefits of a 15-year mortgage

With a 15-year mortgage you’ll own your home much faster and pay less interest.

Build equity faster

A 15-year fixed-rate mortgage, with its lower interest rate and higher payment amount, builds home equity faster because you pay down the principal balance quicker.

Shorter path to full homeownership

Owning a home free and clear is a goal that burns bright for many people. What matters most to them is a feeling of safety from knowing that their home is fully paid off.

Long-term savings

Lenders are exposed to fewer years of risk on a 15-year mortgage, so they charge a lower interest rate. Half as many years of payment also means you pay half as many years of interest. Let’s compare the principal and interest — not including homeowners insurance, property tax or private mortgage insurance — for a $250,000 mortgage with a 10% down payment:

  • A 30-year fixed-rate mortgage at 3.61% has monthly payments of $1,024 and a total interest cost of $143,719.
  • A 15-year fixed-rate mortgage at 3.13% has monthly payments of $1,568 and a total interest cost of $57,226.

That’s a savings of $86,493 if you kept the loans for their entire term.

Is a 15-year mortgage right for you?

A 15-year, fixed-rate mortgage is a great tool for borrowers who can afford the higher payments while still saving and investing for retirement. Paying off a mortgage gives many people a feeling of independence, safety and accomplishment.

But if your income is uncertain or variable, you may want to avoid the 15-year mortgage. Ask yourself: What would happen if the payments become too much? Do you have a realistic plan to cope, or would you stretch your finances too far?

Find out what your best options are by scheduling a free consultation with our Mortgage team. They are committed to getting you the best rate possible, keeping your closing costs low, and being your partner start to finish.

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2 Comments

  1. I have a loan for a rv that I would like to refinance at a lower rate than 4.99% rate. It’s a 2018 Montana that I bought new in 2018. Is it possible?

    • Hello, Ray – here are our current rates: westcommunitycu.org/rates/rates-loans.htm#newrv

      But it looks like your current rate is better than what we can offer at the moment for RVs. You can always contact the credit union and see if Member Services has any solutions beyond a refinance that would save you money in the long run.

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