Because your new loan comes with a shorter repayment timeline, your mortgage payment will be higher, leaving you with less money for savings and other expenses. Make sure you have at least 20% equity in your home to avoid private mortgage insurance (PMI) on your conventional loan.Ĭons of Refinancing to a 15-year Mortgage If you have a home loan from the Federal Housing Administration (FHA) and are eligible to refinance, refinancing into a conventional 15-year mortgage can eliminate your ongoing mortgage insurance premiums. Refinancing gives you the opportunity to switch from an adjustable-rate mortgage to a fixed-rate loan so that you can enjoy a consistent monthly payment. With a cash-out refinance, you can tap this equity and use it to achieve various financial goals such as buying an investment property or funding home improvements. The accelerated repayment timeline means you will have more home equity sooner. Fewer payments also gives you the chance to own your home outright sooner. Since you have fewer payments, your total interest costs should be lower than if you were to choose a 30-year term. Pros of Refinancing to a 15-year Mortgage There are several advantages and disadvantages to consider before you refinance to a 15-year mortgage. Pros and Cons of Refinancing to a 15-year Mortgage You’ll receive a new rate, monthly payment and amortization schedule. When you refinance, you’ll replace your existing loan with a new mortgage. Therefore, your mortgage payment remains the same, although the escrow payments for property taxes and homeowners insurance can fluctuate. Like a 30-year fixed mortgage, a 15-year fixed mortgage carries the same interest rate for the life of the loan. Your monthly payment will most likely be higher, but in exchange, you can potentially save tens of thousands of dollars in total interest during the loan’s term.
Mortgages with a 15-year repayment term are paid off in half the time of a traditional 30-year home loan.
0 kommentar(er)
