Mortgage interest rates have been quite low over the past months and many homeowners have been refinancing in the hopes of getting a lower monthly mortgage payment. Refinancing can bring a lower mortgage rate and payment, making a home more affordable, but there are many using refinancing as a way to get out of mortgage debt earlier.
Typically, homeowners have been refinancing to a 30-year fixed rate mortgage in the hopes of getting a lower payment on their mortgage, but some homeowners have refinanced to a 15-year fixed rate mortgage so that they can get out of mortgage debt faster and at less cost overall. A 30-year fixed rate mortgage can cost almost double the original amount of the home loan, when interest and time is factored.
However, a 15-year mortgage, which usually comes with a lower interest rate than a 30-year fixed mortgage, can offer a homeowner who refinances to this type of home loan the opportunity to get out of debt in half the time and at less cost. The 15-year mortgage comes with a higher monthly mortgage payment, though, but homeowners who refinance to their home loan stand to save more money overall, in most cases.
Homeowners are able to take advantage of current low mortgage rates, but they often need to have equity in their home, a good credit score, and the ability to afford the costs of refinancing before it’s beneficial. Financial advisors often suggest that homeowners who are considering refinancing should make sure it’s in their financial interest to do so and they can accept the responsibilities that come with refinancing.