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How to land an ultra-low 15-year mortgage rate for your refinance

How to land an ultra-low 15-year mortgage rate for your refinance
How to land an ultra-low 15-year mortgage rate for your refinance

Thanks to this year’s historically low mortgage rates, refinancing remains a popular activity among homeowners — and it has taken on more urgency as a new refi fee threatens to push rates higher this fall.

A 30-year fixed-rate mortgage might be a borrower’s automatic first choice for a refi loan. But if you’ve been in your house a few years, refinancing to a 15-year mortgage can keep you from dragging out the debt and piling up massive interest costs.

The monthly payments on a 15-year home loan can be steeper, but the interest rates are lower: currently near an all-time low at an average 2.37%, which is one-half of 1 percentage point (0.50) below the typical 30-year mortgage rate, according to mortgage company Freddie Mac.

Some borrowers in 2020 have been able to score 15-year rates in the low 2s or even under 2%.

Could you? Here are four tips on how to get the very best deal when refinancing into a 15-year mortgage.

1. Run the numbers on 30- and 15-year loans

Most mortgage lenders offer both 30- and 15-year terms. Compare the current average rates between the two loan products, then zero in on a couple of lenders and see how their 30- and 15-year rates differ.

If 15-year mortgage rates don’t seem substantially lower, it may not seem worthwhile to accept the stiffer monthly payment that comes with the shorter-term loan.

Still, the long-haul savings can be considerable.

Freddie Mac says rates are now averaging 2.87% for a 30-year fixed-rate mortgage, versus 2.37% for the 15-year option. Let’s say you’re trying to decide whether to refinance a $200,000 mortgage balance for either 15 or 30 years at today’s average rates.

  • Your monthly payment would be $1,321

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