If you’re looking for a way to significantly reduce your total mortgage expense, or to pay off your loan much, much faster, you should really look at switching to a 15-year fixed rate mortgage.
At this moment 15-year fixed interest rates are 0.75% (or more!) below the 30-year fixed rate. That means significant savings over the life of your loan — on the order of tens of thousands of dollars.
It’s true that you can reduce your payback time by just making higher-than-normal mortgage payments on your current 30-year loan, which more quickly pay down your loan’s principal. By refinancing to a 15-year fixed, however, you both pay off your mortgage faster AND benefit from a lower interest rate, which saves you in the long run.
Whether you’re trying to buy or just refinancing an existing loan, the lower interest rate of a 15 year mortgage can be really attractive. Plus, refinancing gives your the opportunity to pull equity out of your home for major expenses or big life events.
Advantages of 15 Year Refinance
- Pay less interest over the life of your mortgage (compared to a 30-year fixed mortgage)
- Get a low, fixed mortgage rate that will never go up
- Get cash out for major expenses, debt consolidation or life events
- Take advantage of our competitive rates & five-star customer service
Let’s do the numbers
Let’s start with a loan for $300,000 on a house worth $400,000. That gives you a LTV (loan-to-value ratio) of 75%.
- At mortgage rates for today (updated 8/3/2017), the 15-year fixed rate is 3.125% and the 30-year rate is 3.875% — that’s the interest rate difference we saw above. This is not a special rate: this is for a basic, owner-occupied single family home.
- For the 30 year, the monthly payment is $1,411. Multiplied by 360 (12 months times 30 years), that means a total payment of $507,960 over the life of the loan.
- For a similar 15 year, the monthly payment is $2,108. Multiplied by 180 (12 months times 15 years), your total payment is $379,440.
That’s a savings of $128,520!
Note these payments do not include taxes or insurance premiums, so your actual payment amount would be greater, but this gives you a basic sense of how it works.
If you want to see how much YOU could save, and take advantage of Newfi Lending’s low interest rates, call us at 888-316-3934 to get a Newfi Lending Mortgage Review today. Note that loans are subject to credit qualifications.