Valid Reasons To Refinance Your 30 Year Mortgage Into a 15 Year Loan

Writen by on 26th Sep 2012

As the interest rates on the 15 year term mortgage loans at their record low level, it isn’t a surprising fact that an increasingly large number of struggling homeowners are choosing to refinance their loans from a 30 year mortgage to a 15 year loan. For all the older Americans who are going through a credit crunch, refinancing into a 15 year term loan would mean becoming debt free before retirement but there are some other considerations too that they need to take into account. As frugality is in, more and more people are trying to get rid of their secured debt through mortgage refinance into a short term loan and then repaying their unsecured debt. If you too are oscillating between whether or not to refinance your home loan into a 15 year term mortgage loan, check out some valid reasons to take the plunge.

Mortgage Loan Refinance

1) You can certainly pay off your home loan faster: Since the time you take out a home loan, your main aim should be to repay the loan and own the home as soon as possible. But when you fall short of cash, it is most likely that you can’t make the payments on time and start defaulting. You either opt for loan modification or mortgage refinancing and in order to change the terms and conditions of the loan in order to facilitate the repayment procedure. If you had a 30 year loan and if you can refinance into a 15 year term loan, the monthly payments may rise but you can easily get out of debt within a short period of time. Within half the time, you can own your home and get back a firm grip on your finances.


2) You can release yourself from the fluctuations of the market: When you take out a 30 year term mortgage loan, the structure of the loan is set in such a manner that the payments that you initially make all go towards paying back the interest rates and therefore you end up building very little equity. Due to this, most of the 30 year loan borrowers look forward to market appreciation so that they can build their home equity within the first half of the term of the loan. But in case of a 15 year term mortgage loan, you can pay off the principal more quickly.

3) You can even save dollars: As per the studies of the National Association of Realtors, the median sales price for the existing homes in the US was $179,000 and if you finance that with a 30 year term loan at an interest rate of 4.36%, you have to pay $142,337 in interest rate throughout the repayment term of the loan. If on the other hand, you take out a 15 year term mortgage loan at 4.38%, you have to pay $140,337 over the life of the loan and this means that you’ll be able to save your hard-earned dollars in the long run.

Therefore when you want to repay your secured debt as soon as possible, opt for short term mortgage refinancing. Consider the benefits mentioned above before choosing this option and shop around for the most appropriate mortgage loan.

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