Refinance into a 15-year mortgage and save a ton of money.
There are at least 2 ways that refinancing into a 15-year mortgage saves money:
Interest rates on 15-year, fixed-rate mortgages typically run about three-quarters of a percentage point lower than the interest rates on equivalent 30-year home loans.
You pay interest for a shorter time. This seems obvious, right? But the difference between making 360 house payments (a 30-year loan) and 180 house payments (a 15-year loan) can total tens of thousands of dollars. And you’re mortgage-free sooner.
A 15-year mortgage carries 2 major drawbacks:
The monthly payments are higher than for a 30-year loan.
It restricts your flexibility when money is tight.
From a financial standpoint, if you can afford a 15-year payment, it definitely makes sense to do that. The big question is, can people afford that jump in payment.