If you’re on a mission to pay off your mortgage as quickly as possible, a 15-year refinance could be a perfect fit.
Mortgage rates are rising, but refinancing into the shorter-term 15-year mortgage could be an ideal fit. Taking out a 15-year loan could allow you to gain the benefits of refinancing without adding years back onto your repayment term.
But there are upfront closing costs to pay if you refinance, and 15-year loans have much larger monthly payments than a 30-year refinance. There are a lot of factors that go into deciding if refinancing, and a 15-year refinance specifically, is right for you.
The Latest Refinance News
What’s Making Refinance Rates Go Up?
The surge in mortgage rates so far this year is due to a variety of economic factors. Persistently high inflation is a big one, Jacob Channel, senior economic analyst at LendingTree told us. May’s inflation report shows 8.6% inflation and the highest in 40 years. In response, the Federal Reserve increased its benchmark short-term interest rate to combat that inflation. The Fed raised rates by 50 basis points in May and by 75 points in June, since inflation remained higher than expected.
Recently, we saw mortgage rates surge after the inflation report and ahead of the Fed’s announcement. “I think what we’re seeing is that lenders had already anticipated that the Fed was going to raise the fed funds rate by 75 basis points and they began to preemptively push mortgage rates up,” Jacob Channel, senior economist at LendingTree, told us.
Financial markets are still responding to other global factors that can affect the economy, namely China’s COVID lockdown and Russia’s invasion of Ukraine. “We have a lot of factors like that that are putting upward pressure on mortgage rates,” Channel says. “The volatility has been through the roof,” Shashank Shekhar, founder and CEO of InstaMortgage, told us. “The market has been adjusting to a new news cycle practically every single day.”
Is Refinancing Still a Good Option?
If you’re looking to refinance to save money by getting a lower interest rate, you can still do so if your current rate is higher than what you’d be able to get on the market today. “If you can lower your rate, regardless of what’s going on in the market, and it’s going to save you money, cool,” Jennifer Beeston, senior vice president of mortgage lending at Guaranteed Rate, told us.
In fact, 1.3 million homeowners could get a rate at least 0.75% lower by refinancing, with 472,000 of those being “high-quality refinance candidates” who meet certain eligibility criteria, according to Black Knight, a mortgage technology and data provider.
While the demand for refinances has cooled off significantly, there are other ways to gain funds for home improvements or consolidate debt. A home equity loan or home equity line of credit (HELOC), known as second mortgages, are growing in popularity as home prices rise.
You might also want to convert a 30-year fixed-rate loan to a 15-year loan or vice versa. “If you are in a position where you think you would benefit from modifying your loan in some way, it doesn’t hurt to ask a lender what they can offer you,” Jacob Channel, senior economic analyst at LendingTree, told us.
As rates continue to rise, refinancing might still be a good option to meet your financial needs, experts say. You can shop around and consider different changes to see if they’re still right. “If you are in a position where you think you would benefit from modifying your loan in some way, it doesn’t hurt to ask a lender what they can offer you,” said Channel.
Compare Multiple Refinance Lenders
Whether you are looking to refinance or purchase, you can compare lender offers here using this Home Loan Comparison Calculator. You can enter in the loan amount, rate, fees, and term for each offer and see a true side-by-side comparison.
Pros and Cons of a 15-Year Mortgage Refinance
Pros
Lower interest rates
Shorter repayment term
Build equity more quickly
Pay much less interest in the long term
Cons
Higher monthly payments
Less money to invest each month
Less money available to save each month
What Are Today’s 15-Year Refinance Rates?
On Sunday, June 26, 2022 according to Bankrate’s latest survey of the nation’s largest mortgage lenders, the average 15-year refinance rate is 5.080% with an APR of 5.100%.
Current 15-Year Refinance Rates
| Product | Interest Rate | APR |
|---|---|---|
| 30-Year Fixed Rate | 5.800% | 5.810% |
| 30-Year FHA Rate | 4.830% | 5.670% |
| 30-Year VA Rate | 4.920% | 5.110% |
| 30-Year Fixed Jumbo Rate | 5.760% | 5.770% |
| 20-Year Fixed Rate | 5.760% | 5.780% |
| 15-Year Fixed Rate | 5.080% | 5.100% |
| 15-Year Fixed Jumbo Rate | 5.070% | 5.080% |
| 10-Year Fixed Rate | 5.110% | 5.140% |
| 5/1 ARM Rate | 4.220% | 5.610% |
| 5/1 ARM Jumbo Rate | 4.180% | 5.370% |
| 7/1 ARM Rate | 5.100% | 5.060% |
| 7/1 ARM Jumbo Rate | 5.140% | 5.000% |
| 10/1 ARM Rate | 5.170% | 5.120% |
| Product | Interest Rate | APR |
|---|---|---|
| 30-Year Fixed Rate | 5.830% | 5.840% |
| 30-Year FHA Rate | 4.800% | 5.600% |
| 30-Year VA Rate | 4.960% | 5.070% |
| 30-Year Fixed Jumbo Rate | 5.790% | 5.800% |
| 20-Year Fixed Rate | 5.820% | 5.840% |
| 15-Year Fixed Rate | 5.080% | 5.120% |
| 15-Year Fixed Jumbo Rate | 5.100% | 5.110% |
| 10-Year Fixed Rate | 5.120% | 5.160% |
| 5/1 ARM Rate | 4.290% | 5.720% |
| 5/1 ARM Jumbo Rate | 4.240% | 5.730% |
| 7/1 ARM Rate | 5.020% | 5.070% |
| 7/1 ARM Jumbo Rate | 5.070% | 4.980% |
| 10/1 ARM Rate | 5.090% | 5.100% |
Rates as of Sunday, June 26, 2022
ABOUT THESE RATES
These rate averages are based on weekday mortgage rate information provided by national lenders to Bankrate.com, which like NextAdvisor is owned by Red Ventures.
These averages provide borrowers a broad view of average rates that can inform borrowers when comparing lender offers. We feature both the interest rate and the annual percentage rate (APR), which includes additional lender fees, so you can get a better idea of the overall cost of the loan. The actual interest rate you can qualify for may be different from the average rates quoted in our rate table. But these rates are useful for giving you a benchmark to use when comparing loan offers by giving you a sense of how the type of mortgage and the length of the repayment term impacts your interest rate and APR.
When Is the Best Time to Refinance Into a 15-Year Mortgage?
The right time to refinance with a 15-year loan is when you can afford the larger monthly payments, and it fits into your financial strategy. It’s a significant commitment to go with a 15-year mortgage over a 30-year mortgage, but you will pay off your mortgage sooner and potentially save tens of thousands of dollars in interest.
If you currently have a $250,000 mortgage balance, here is what you would pay for a 15- and 30-year refinance loan at today’s rates, according to the NextAdvisor mortgage calculator.
| Loan Term | Loan Balance | Interest Rate | Monthly Payment | Total Interest |
|---|---|---|---|---|
| 30 Years | $250,000 | 3.13% | $1,071 | $135,929 |
| 15 Years | $250,000 | 2.44% | $1,659 | $48,820 |
Even with the lower interest rate you could qualify for with a 15-year loan, the monthly payment is an additional $588+ more a month. But, over the life of the loan, you’d paid nearly $90,000 less in interest. That’s a big monthly commitment with the potential for significant savings. So before you go all-in on a 15-year loan, be sure you can afford it and that it won’t take away from other priorities, such as saving for retirement or building an emergency fund.
Alternatives to a 15-Year Refinance
A 15-year refinance is just one financial tool that can help you achieve your goals, but it may not be the only answer for what you’re trying to do.
This type of refinancing can lock you into a hefty monthly payment. If you’re not sure if you’ll be able to afford a 15-year loan’s payment for the long haul, you could simply pay on a 30-year loan as if it was a 15-year loan. Just make sure that your lender knows you’re making extra payments.
In this scenario, you won’t be able to secure the lower interest rate 15-year loans often have, but you will save on interest by paying off your loan earlier. This is less risky because if you experience a loss or reduction in your income, you have the flexibility to make smaller payments without going into default.
You could also look at a loan between 15 and 30 years. Some lenders offer 20-year mortgage refinance loans, which could allow you to shave years off your existing loan term while committing to a somewhat smaller monthly payment.
Here is how a $250,000 loan’s monthly payment and overall cost could change with the different loan terms and rates.
| Loan Term | Interest Rate | Monthly Payment | Total Interest |
|---|---|---|---|
| 30 Years | 3.13% | $1,071 | $135,929 |
| 30 Years* | 3.13% | $1,659 | $68,002 |
| 20 Years | 3.01% | $1,387 | $83,125 |
| 15 Years | 2.44% | $1,659 | $48,820 |
Once you run the numbers for all of your options, you’ll have a better idea of what loan term best fits your goals. There is no one loan option that is the best deal, but there is one that can help you reach your financial goals.
15-Year Refinance Rate: Frequently Asked Questions (FAQ)
What is a 15-year fixed refinance rate?
A 15-year fixed refinance rate is a type of home loan designed to replace your existing mortgage. It has a fixed mortgage interest rate, so the amount of interest you’ll pay won’t change over the life of the loan. And with a 15-year payment term, you’ll pay off your mortgage in half the time you would with a 30-year mortgage refinance.
A 15-year refinance typically has a lower interest rate than longer-term loans — but it comes with a higher monthly payment. At today’s rates, a 15-year $250,000 loan’s monthly payment is nearly $600 more than a 30-year loan even though it would have a lower interest rate.
When should I consider a 15-year refinance?
15-year refinance loans typically have a lower rate than a 30-year loan. A 15-year mortgage refinance can be a good way to pay off your mortgage sooner and save on interest. So the best time to consider refinancing is when rates are low enough that your interest savings will outweigh the upfront closing costs associated with a refinance loan.
For homeowners with more than 15 years left on their mortgage, a 15-year loan is a great way to potentially secure a lower rate without adding years to your repayment schedule.
Because the monthly payments on a 15-year mortgage are higher, refinancing to a shorter-term loan makes the most sense if your income has increased since purchasing your home.
So before you commit to bigger monthly payments make sure your current financial situation can support them.
What is a good 15-year refinance rate?
In 2020, the 15-year refinance rate average fell below 2.25% for the first time ever and is currently hovering around 2.5%. However, that doesn’t necessarily mean it’s the best refinance rate you’ll be able to qualify for. And it doesn’t mean it’s a good deal for you.
Sometimes an advertised low rate can have built-in discount points. These points are extra fees you can pay in exchange for a lower rate. So you need to pay attention to not only your interest rate, but also the upfront fees you’re paying for the loan.
At the end of the day, a good 15-year refinance rate is one that is considerably less than the current rate you’re paying, allowing you to save money on interest over time with a new loan.
How do I choose between a 30-year fixed refinance or a 15-year?
Some experts, like NextAdvisor contributor Suze Orman, caution against extending your loan term because it could cost you more in the long run. Orman believes you should never refinance into a mortgage that will extend the amount of time you have until your loan is paid off.
But when rates are low enough you may be able to reduce your monthly payment and the amount of interest you owe without extending your mortgage’s repayment term with a 15-year mortgage.
Another option is to refinance into a new 30-year loan, but make payments as if it was a 15 -year mortgage. That way you can still pay off the loan in the same amount of time, but you’ll have the flexibility to make smaller payments if you fall on hard times.
How do I find the next 15-year refinance rate?
Your mortgage refinance rate will depend on your financial situation (e.g., credit score and income etc.), how much equity you have in your home, and even the type of refinance you’re applying for. So to get the best 15-year refinance rates, you’ll need to shop around and compare mortgage lenders.
To qualify for the lower rates, you’ll need a high credit score (700+), and at least 20% equity in your home. You can also expect to pay a higher rate with a cash-out refinance compared to other types of refinancing because lenders view this as a riskier type of refinance loan.
