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15 Year Home Loans
15 year home loans often have lower rates than 30 year mortgages and save thousands in mortgage interest over the life of the loan.
EXAMPLE: 15 Year Mortgage VS 30 Year Mortgage
Initial loan: $250,000
30 year mortgage rate: 5.5%
15 year mortgage rate: 5% (factoring in lower rate for 15 year home loans)
30 year loan
Total interest paid: $261,010.10
Mortgage Payment: $1,419.37
15 year loan
Total interest paid: $105,857.13
Mortgage Payment: $1,976.98
The savings are substantial because the principle that the mortgage interest is based on is paid down much faster in
the 15 year home loan.
When to refinance a mortgage to a 15 year loan:
- Mortgage refinancing to a 15 year home loan is highly recommended if the original loan is an aged 30 year loan. If
there are only 15 years left on a 30 year loan chances are the loan can be refinanced to a 15 year mortgage at a lower
rate and lower monthly payment. If the same older loan was refinanced to another 30 year loan the total time spent
making payments would be 45 years (15 years for the orignal loan and 30 years for the new mortgage loan).
- If the original borrower does not make more interest than the mortgage rate on investments and can afford the
higher payment 15 year mortgage refinancing is a good way to save money.
- Building equity in a home is another good reason to refinance to a 15 year mortgage. Building equity has many
benefits. If the home decreases in value having equity can keep the home above water. This makes it possible to
sell the home in the future without coming up with money to pay off the remaining balance after the sale. In addition,
the more equity on a personal financial profile the stronger that profile appears in the eyes of creditors.
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