15-Year Mortgage Refinance Rates for September 2021

What is a 15-Year Fixed-Rate Refinance Mortgage?

A 15-year fixed mortgage refinance 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.

When to Consider a 15-Year Refinance

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.

NextAdvisor contributor Suze Orman says you should never refinance into a loan with a longer repayment term than what’s left on your existing mortgage. 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.

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

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 $300,000 mortgage balance, here is what you would pay for a 15- and 30-year refinance loan, according to the NextAdvisor mortgage calculator.

Even with the lower interest rate you could qualify for with a 15-year loan, the monthly payment is an additional $700+ more a month. But, over the life of the loan, you’d paid nearly $100,000 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 retirement or building an emergency fund.

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. 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 to Find the Best 15-Year Refinance Mortgage Rates

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.

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.

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 your loan’s monthly payment and overall cost could change with the different loan terms and rates.

Opting for a 20-year refinance would cost you about $339 less a month compared to a 15-year loan. But you’d still save more than $63,000 in interest over the life of the loan.