One of the few good things we can all point to in 2020 is that this year’s lowest mortgage rates have provided homeowners incredible savings through refinances.
If you own a home and have a 30-year mortgage that could benefit from a refinance, your first thought might be to go with another 30-year loan. Refinancing in this situation would likely shrink your monthly payment, maybe by hundreds of dollars, and give your family budget breathing room.
That sounds great, but there are also reasons to consider refinancing to a 15-year mortgage instead. Both 30- and 15-year fixed mortgage rates have hit record lows in 2020. If you are in a situation where you can manage the higher monthly payment, a 15-year mortgage refinance might be better for you. Not only will you be paying a lower interest rate on the loan, but you will also cut back on the number of years on the loan. This leads to a huge savings on the amount of interest paid over the loan term.
It’s generally true: refinancing to a new 30-year loan would likely reduce your monthly mortgage costs. Just remember that refinancing to a 15-year mortgage will reduce your long-term costs. Your decision ultimately comes down to how you feel about your current financial situation and your financial situation down the road.