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 Mortgage Rate & Housing Market News
What’s Going On With Rising Mortgage Rates?
Mortgage rates have been on the rise since the start of the year and haven’t stopped yet. A big reason behind the increase is that inflation has remained at its highest level in 40 years. The Consumer Price Index was up 8.2% year-over-year in September – lower than August but still well above what markets and the Federal Reserve are comfortable with.
The Fed’s approach to high inflation has been to raise its benchmark short-term interest rate, a strategy that aims to make borrowing more expensive and encourage saving, driving down demand for goods and services and reducing prices. The Fed last raised its federal funds rate in September, and is expected to do so again in November.
The economic situation has mortgage rates jumping up and down on a daily basis.
“The market just can’t really decide which way it wants to go in terms of the direction of rates,” says Melissa Cohn, regional vice president of William Raveis Mortgage in New York.
Don’t expect mortgage rates to plummet until economic conditions change, experts say.
“Until we get some sustained evidence that inflation is beginning to recede, the upward pressure on mortgage rates will remain,” Odeta Kushi, deputy chief economist at First American Financial Corporation, told us.
What Can Homebuyers Do About Rising Mortgage Rates?
The current housing environment is particularly tough for first-time homebuyers, but it might still make sense to buy. “It’s always a good time to buy a home, if that’s what is important to you. It’s just about doing your research and making good informed decisions,” Eileen Derks, head of mortgage at Laurel Road, told us.
Rising mortgage rates have made affordability increasingly difficult for homebuyers, despite some drops in home prices. If you’re considering a mortgage, experts say it’s more important than ever to shop around with different lenders, as rates can vary dramatically from day to day and from lender to lender.
“Until you’re ready to lock, you need to keep your eye on more than one ball,” Cohn says.
What’s Happening With Home Prices?
The big surge in mortgage rates has started to bring down home prices. The median existing home sold for $389,500, up 7.7% from a year earlier but down from figures of more than $400,000 seen earlier in the summer, according to the National Association of Realtors (NAR).
How quickly the housing market is turning around depends on where you are. In some cities, prices are seeing month-to-month price drops of nearly 3%, while others are still riding a wave of increases. “It’s very market-dependent at the moment,” says Robert Heck, vice president of mortgage at Morty, an online mortgage broker.
Home sales figures are dropping significantly – down 0.4% from July to August and nearly 20% from August 2021 – in part because homeowners who have favorable mortgage rates are unwilling to sell and get a loan at a much higher rate.
Homebuyers facing a difficult environment can find creative ways to save money on a home purchase. One is to consider an adjustable-rate mortgage, Cohn says. They tend to offer periods of several years with a fixed rate – and it should be significantly lower than a 30-year fixed rate would be – before the rate starts to adjust with the market. That should give you a few years to refinance if the market improves.
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 Monday, February 06, 2023 according to Bankrate’s latest survey of the nation’s largest mortgage lenders, the average 15-year refinance rate is 5.800% with an APR of 5.820%.
Current 15-Year Refinance Rates
| Product | Interest Rate | APR |
|---|---|---|
| 30-Year Fixed Rate | 6.510% | 6.520% |
| 30-Year FHA Rate | 5.690% | 6.610% |
| 30-Year VA Rate | 5.770% | 5.980% |
| 30-Year Fixed Jumbo Rate | 6.550% | 6.560% |
| 20-Year Fixed Rate | 6.470% | 6.480% |
| 15-Year Fixed Rate | 5.800% | 5.820% |
| 15-Year Fixed Jumbo Rate | 5.860% | 5.880% |
| 10-Year Fixed Rate | 5.820% | 5.850% |
| 5/1 ARM Rate | 5.340% | 7.150% |
| 5/1 ARM Jumbo Rate | 5.350% | 6.890% |
| 7/1 ARM Rate | 5.930% | 6.670% |
| 7/1 ARM Jumbo Rate | 6.080% | 6.340% |
| 10/1 ARM Rate | 6.250% | 6.570% |
| Product | Interest Rate | APR |
|---|---|---|
| 30-Year Fixed Rate | 6.460% | 6.470% |
| 30-Year FHA Rate | 5.680% | 6.580% |
| 30-Year VA Rate | 5.800% | 5.920% |
| 30-Year Fixed Jumbo Rate | 6.490% | 6.500% |
| 20-Year Fixed Rate | 6.480% | 6.500% |
| 15-Year Fixed Rate | 5.710% | 5.740% |
| 15-Year Fixed Jumbo Rate | 5.790% | 5.810% |
| 10-Year Fixed Rate | 5.770% | 5.800% |
| 5/1 ARM Rate | 5.420% | 7.390% |
| 5/1 ARM Jumbo Rate | 5.500% | 7.380% |
| 7/1 ARM Rate | 5.930% | 6.620% |
| 7/1 ARM Jumbo Rate | 6.090% | 6.260% |
| 10/1 ARM Rate | 6.130% | 6.670% |
Rates as of Monday, February 06, 2023
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.
