Current Low Refinance Mortgage Rates and Home Loan Term Reduction
Way back in the early part of 2009, the refinance mortgage rate spread difference between a 30-year fixed rate mortgage and a 15-year fixed rate home loan was virtually negligent. Many refinancing homeowners opted for the 30-year mortgage and the lower payment, since the cost of the interest rate was pretty much the same. The feeling was that the borrower could pay extra toward the principle to reduce their loan term or simply take advantage of the monthly savings for something else. The key was that the option was in the hand of the homeowner to make that decision.
Fast-forward to present and the interest rate spreads are vastly different. 15-year fixed rate mortgages are much cheaper than their 30-year counterpart.
For instance, I just ran a rate search for a loan scenario with a $250,000 home value, $200,000 loan amount and a 760 credit score. The closest to par or “even’ rate for the 30-year fixed is at 4.875%, while the closest to par for the 15-year fixed is 4.25%.
Yes, there is currently a significant reduction in rate for shorter-term loans.
If a refinancing homeowner took the 30-year mortgage option for their new $200,000 home loan, their monthly principle and interest payment would be $1,058 and total interest paid for the term of the loan would amount to $181,029.
Taking the 15-year option would result in a monthly principle and interest payment of $1,504 and total interest paid over the term of the loan would be $70,820.
The interest saved by choosing the 15-year refinance is $110,209!
Now, you might say that is all well and good but the monthly payment difference is $446. That is why it is extremely important to take the new payment into consideration before refinancing into a shorter term. You must be comfortable with the new payment.
Also consider that the increase in monthly payment may not be as significant from your current payment, because mortgage refinance rates are currently so low.
For example, if the borrower in the preceding example is refinancing from a $200,000 30-year mortgage taken out 2 years ago at 6.5%, their current monthly payment for principle and interest is $1,264. Refinancing into the 15-year option would result in only a $240 per month difference, plus a reduction in loan term of 13 years along with total interest savings of around $200,000.
Also, for those consolidating debts, a term reduction can lead to a lower overall monthly payment in many cases.
The long and the short of it is that there are many options to save significant dollars when mortgage refinance rates are as low as they are now. Planning your benefit in conjunction with your new mortgage timeframe is a smart way to go.
If you are considering a refinance now and need some help, have questions, or need some competitive rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
Fast-forward to present and the interest rate spreads are vastly different. 15-year fixed rate mortgages are much cheaper than their 30-year counterpart.
For instance, I just ran a rate search for a loan scenario with a $250,000 home value, $200,000 loan amount and a 760 credit score. The closest to par or “even’ rate for the 30-year fixed is at 4.875%, while the closest to par for the 15-year fixed is 4.25%.
Yes, there is currently a significant reduction in rate for shorter-term loans.
If a refinancing homeowner took the 30-year mortgage option for their new $200,000 home loan, their monthly principle and interest payment would be $1,058 and total interest paid for the term of the loan would amount to $181,029.
Taking the 15-year option would result in a monthly principle and interest payment of $1,504 and total interest paid over the term of the loan would be $70,820.
The interest saved by choosing the 15-year refinance is $110,209!
Now, you might say that is all well and good but the monthly payment difference is $446. That is why it is extremely important to take the new payment into consideration before refinancing into a shorter term. You must be comfortable with the new payment.
Also consider that the increase in monthly payment may not be as significant from your current payment, because mortgage refinance rates are currently so low.
For example, if the borrower in the preceding example is refinancing from a $200,000 30-year mortgage taken out 2 years ago at 6.5%, their current monthly payment for principle and interest is $1,264. Refinancing into the 15-year option would result in only a $240 per month difference, plus a reduction in loan term of 13 years along with total interest savings of around $200,000.
Also, for those consolidating debts, a term reduction can lead to a lower overall monthly payment in many cases.
The long and the short of it is that there are many options to save significant dollars when mortgage refinance rates are as low as they are now. Planning your benefit in conjunction with your new mortgage timeframe is a smart way to go.
If you are considering a refinance now and need some help, have questions, or need some competitive rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
Labels: business, economy, fha refinance, finance, home loans, money, mortgage rates, refinance, refinance rates, refinancing
posted by Jim Bisnett at
12:18 PM
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