A 15-Year Mortgage: Is It A Good Idea To Refinance?

Pros of Paying Off Your House Faster

I changed my family’s most important asset, our home, into a very safe 15-year fixed-rate mortgage. This isn’t for me. That is up to you. A few years ago, we could free up an extra five years’ worth of income for other things by refinancing our mortgage.

Our mortgage payment was about $1,200 a month. Not paying our mortgage for five years means that we can help our kids pay for college, boost our retirement savings, or buy a small retirement home in a desirable location while we turn our paid-for family home into a rental.

She says that for a middle-class family, owning their home without a mortgage can have an emotional and psychological effect that goes beyond the money they will save. I think so, too. The only thing I will have to pay in taxes in my later years when my income is likely to be less is to pay the taxes on the home I already own.

Although I am not a mortgage broker, this was my process

No, I am not a mortgage agent, and I don’t work for any company that deals with homes. I’m a stay-at-home mom, and I was looking for a way to help my family earn more money. After living in our house for almost five years, it turned out that we had very little equity. Why? To pay off our 30-year loan, we had to pay a lot of interest first (the part of the house payment that pays off the loan).

I did some comparison shopping on the internet because I was curious about what other people did. I used interest rate calculators and loan-comparison wizards to figure out that if we refinanced our home and paid a higher mortgage payment, we would be able to build equity in our home a lot more quickly.

Compare 30-Year and 15-Year Loans

First, you pay the interest on your 30-year loan. Then, for the first 15 years, you build little equity because you pay the interest on your loan. Then, on the first day of a 15-year loan, your loan pays about half interest and half the amount you borrowed.

You can notice how much it prices to get a $100,000 mortgage here. During this time, most Americans would be happy to pay only $100,000 on a mortgage, and it seems like a good round number to work with. The point difference between a 30-year and a 15-year loan is usually about half of a point. Compare: I chose to do this.

⦁ A 30-year, $100,000 mortgage at 5.75%
⦁ A 15-year, $100,000 mortgage at 5.25 %

This is the appearance of the amortization table:

A 30-year, $100,000 mortgage at 5.75%

After five years, you only have $5000 worth of equity. With a 30-year loan, that’s not a lot. In the first 3-5 years, you will have very little to show for moving.

A 15-year, $100,000 mortgage at 5.25 %

The loan payment for this loan is $803.88. With no money in the budget, this could be a big mistake. If you have the money, you could have $20,000 more equity in your home in just five years.

What Self-Assessment Questions Should I Ask?

If you need to keep money, you can refinance a 15-year loan. But there is a cost. Your loan payment will go up, which could go up a lot. At times, our budget was stretched to the limit. Our loan payment went up, which made our budget feel tight. This may not be a large deal as long as your home is only for starters.

You may want to think about how a much higher loan payment will affect your family’s budget if you are on a modest one-income budget or if your loan is for 30 years. Student lending debt, Credit card debt, or other personal problems may make a 15-year loan too much for your family to handle. When the cost of fuel and food goes up, you might better keep your money.

How much will a refinance cost me? Almost $4,000

⦁ Do I have good credit? If I refinance now, will my rate go down?
⦁ Is it possible for me to be tied to a bigger payment?
⦁ Self-control can help you make an extra payment instead of refinancing your home, but only if you can do it. Some online calculators show you how to do that, too.
⦁ Is there enough money in my bank account to make the payment if I fall behind?
⦁ No, we don’t plan to stay in the house for that long.
⦁ Does my house still have the same value as when I bought it? If your house is 6 years old or older, you’re probably fine. You should look into the value of your home and talk to an expert before making any money moves.
⦁ Is there a way I could make more money with the extra payment?