The Refinance Boom is not Over? Refinance Your 30-Year to a 15-Year!

January 28th, 2014

Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. For example, I know of many people who have excellent interest rates on their 30-Year fixed rate mortgages, and plan to be in their home for a long time or possibly forever. These people should consider giving up their low 30-Year fixed rate, and get a still quite low 15-Year fixed rate, and save a small fortune over time. Let me give you an example.

Let’s assume the following:

  • A homeowner owns a home with a $300,000 loan that was refinanced at the bottom of the market in late 2012 or early 2013, and has a 3.5% 30-Year fixed rate.
  • He currently owes $294,000. This principal and interest payment is $1,347 (not including taxes and insurance).
  • Over 30 years his total payments are $484,970 and his total interest is $184,970.

If this homeowner refinanced the current principal to a 15-Year fixed rate today at 3.625%, this principal and interest payment would be $2,119 (not including taxes and insurance). Over 15 years his total payments are $381,573 and his total interest is $87,573.

Yes, the monthly payment would be higher on a 15-Year loan. However, as you can see by numbers above, the savings would be stunning. This consumer would save approximately $103,000 in total payments, and of that amount, about $97,000 represents interest. I think it’ll be worth it to shorten the term of the loan to save that money, if you are going to live in the property for a longer time frame.

If the payment is too high you can always consider a 20-Year term instead of a 15-Year term. Regardless, if you are going to be in your house for a long time, even if you have a good interest rate on a current 30-Year loan, you should pick up the phone and call a mortgage lender to talk about refinancing to a shorter term, even though rates today are higher than they were a year ago.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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