If we can find any good in the COVID-19 crisis, it’s low mortgage interest rates. While rates were low in the pre-pandemic days, they continue to stay there and sometimes even dip lower, helping homebuyers and even current homeowners save money.
Low rates create the perfect refinancing environment. Who doesn’t want to pay less interest, right? Rather than refinancing into another 30-year term and starting the clock all over again, though, consider a 15-year refinance.
With today’s low rates, a 15-year loan may be more affordable than you think.
Considering the 15-Year Refinance
Here are the obvious facts – you pay your loan off in 15 years rather than 30 years. You own your home in half the time. Sounds appealing, right? It is, but for the right borrower.
Here’s what you should consider:
- Lower interest rates – Most banks offer lower interest rates for 15-year loans because you borrow the funds for half of the time of the 30-year loan. Many people save thousands of dollars over the loan’s term.
- Higher payments – You pay the loan off in half of the time. This means higher principal payments. When you combine it with lower interest costs, though, the difference may not be as staggering as it sounds. Just make sure you can afford the higher payment, though.
- Cash flow – What’s your ‘extra’ cash flow like right now? Is your emergency fund stocked with 3 to 6 months of expenses? Do you max out your retirement savings? If you’re set in other areas of your life, taking a 15-year term is another step toward financial freedom, helping you own your home in half of the time.
- Job stability – COVID-19 made even the most stable job feel unstable. What’s your job situation? Is your company stable (essential) and your job secure or do you wonder from one day to the next if you’re on the chopping block? If you have job stability, choosing the 15-year term further enhances your financial situation. If you’re unsure about your job’s future, stick with the 30-year term.
30-Year Mortgage Rates are Great Too
Don’t forget, 30-year rates are low right now too. If you can’t swing the 15-year payment right now, don’t put yourself under that pressure. You can, however, refinance into another 30-year term or even a slightly shorter term.
For example, if you’ve already paid 5 years on a 30-year term, consider a 25-year term. You’ll take advantage of today’s low rates and still own your home free and clear around the same time. The bottom line is that rates are great right now. COVID-19 made it so refinancing is affordable. If you’ve been thinking about it, jump on the bandwagon and save money on interest. We’ll help you decide if a 15 or 30-year loan works best by showing you the numbers both monthly and over the loan’s term, helping you make an educated decision with your mortgage.
