Source: Bankrate —
Many homeowners choose to refinance from a 30-year fixed-rate mortgage to a fresh 30-year equivalent. While this can lower your monthly payment, it adds extra years to the total period of time you’ll be financing your home. That means you’ll pay more in total interest over the combined terms of your original loan and your refinanced loan than you might expect.
Should you refinance into a 15-year mortgage?
It can be smart to pursue a refi with a shorter term. Refinancing from a 30-year, fixed-rate mortgage into a 15-year fixed loan can help you pay down your loan sooner and save lots of dollars otherwise spent on interest. You’ll own your home outright and be free of mortgage debt much sooner than normal. Plus, mortgages with shorter terms often charge lower interest rates. Consequently, more of your monthly payments will be applied to the loan’s principal balance.
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Like buying a new home, refinancing your home loan also requires you to apply, get an appraisal of the house, and then close your loan. There are also technical elements your loan specialist takes care of, such as underwriting and helping you lock in an interest rate.