Why is a 15-Year-Fixed Refinance a Smart Move Right Now?

refinanceMost home purchases are completed using a thirty-year-fixed or adjustable rate mortgage. While thirty years is the standard for a home loan, it isn’t the only option and it isn’t always the best option. When you get a home loan or refinance an existing loan, you can do so with a thirty-year term, or you can get a shorter term such as a 15-year-fixed. There are pros and cons to making this decision, but with FHA Refinance rates being so low, the 15-year fixed is more appealing than ever. Here are just a few reasons why you may want to consider this shorter term loan.

What are the benefits of the refinance rates today?

refinancey voiceHow do I find solid refinance rates today?

How Does the Economy Impact Refinance Rates?

Saving Money With a 15-Year-Fixed Refinance

fixed rate refinanceWhen you take advantage of low FHA refinance rates today and refinance into a fifteen-year mortgage, you can get lower rates than you had anticipated. The fifteen-year term carries a lower risk for the lender because homeowners are paying off their mortgages more quickly, and they are paying more into their mortgage every month. The equity builds faster and the risk decreases exponentially. As a lender, not having to carry extra risk is a bonus, so they end up lowering the interest rate. Most of the time the rate will be up to one percent lower. One percent, when calculated into a $200,000 mortgage, means big savings.

There is also the added bonus of paying less over time. On a thirty-year mortgagee the interest is recalculated annually, so every year you have to pay the interest on whatever is left of your mortgage. You’ll do this for thirty years. By the time the loan is paid in full, you may realize that you’ve paid double – or more – than what you would have. Compare this to a fifteen-year mortgage and you’ll see a huge amount in savings just in interest alone. You could potentially save thousands of dollars by refinancing from your 30-year into a 15-year as long as you can get the low FHA refinance rates today that are available.

Getting Rid of Your Mortgage Payments Sooner

mortgage refinanceWhen you originally sign on to a thirty-year fixed mortgage, it may not have felt like much of a commitment. However, take that monthly payment and think about paying that amount until you retire, because that is often the case. With a fifteen year loan you can pay it off long before you retire, or if you’re nearing retirement age than shortly after. The point is; you’re going to be out from under the loan sooner, owning your home free and clear. So not only will you pay less in interest, you’ll have the weight of your mortgage payment lifted off your shoulders much sooner. No more monthly requirements! You can then use that money for college funds, weddings for your kids, a nice vacation, or a million other things. When you own your home free and clear, the monthly expenses are much less taxing.

There are a few downsides to the fifteen-year mortgage. The first is your monthly payments are bigger. The second is that the tax breaks for a home mortgage aren’t as advantageous. You will probably see less of a refund or find that your loan has less of a positive impact on your taxes. And, in some cases, the loan won’t save you money so before you lock yourself into it, make sure it actually does.

refinanceThe biggest reason people want to refinance is because the FHA rates are so low right now. One of the biggest reason they go for a fifteen-year mortgage is because it has the potential to save them thousands, while simultaneously getting them out of a mortgage sooner. You need to be in a good place financially if you want to get the fifteen-year because, as mentioned, your mortgage payment will be higher. However, if you can refinance and take on the increased load, you may find that you save enough that the monthly payment is worth it. As with any major financial decision, before you get anything approved discuss with your loan officer and financial advisor whether or not this is a good plan for you. The refinance is there to offer you a financial benefit.

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