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Refinance to Get a 15-Year Mortgage

Posted by  on Apr 02, 2010
 

More homeowners looking to refinance are applying for 15-year mortgage loans. A fifth of all mortgage refinance applications were for 15-year loans in October, according to the Mortgage Bankers Association. Here's what you need to know about refinancing to a 15-year mortgage.

  • Mortgages for 15 years currently have some of the lowest mortgage rates ever. Freddie Mac data put 15-year mortgage rates at an average of 4.38% in the middle of December 2009. Thirty-year mortgage rates averaged 4.94%.
  • Monthly payments on a 15-year mortgage loan can be a lot higher than if you refinance into a 30-year loan. If you have any doubt about being able to afford the 15-year payment, you could always refinance for 30 years but double up on all your payments to pay off the loan balance quicker. Just make sure there is no prepayment penalty for paying off a mortgage balance early.
  • If you've been paying on a mortgage for a long time, refinancing into a 15-year loan could slash your payments. Use a mortgage refinance calculator to see how your payments might change and how long it can take to break even on any closing cost paid to refinance.
  • Sometimes it pays to increase your monthly mortgage payments with a 15-year loan. You have to weigh the pros and cons for the increased monthly payments, but over the long term you end up paying less interest.

Get free mortgage quotes from several lenders to discuss your options. Ask to receive quotes for a 30-year refinance and for a 15-year refinance. Also ask for the APR on any refinance deal being offered so you can determine the true cost of borrowing money. Compare all the fees and closing costs listed on the Good Faith Estimate (GFE), which should be given to you within three days of applying for a mortgage loan.

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