What a 15 Year Fixed Mortgage Can Do For You
Recently rates reached record lows that have not been seen since the 1950’s. Many people may think that they either have taken advantage of refinancing or that it may not make sense for them at this time. If you belong to the latter half of this group, consider this: if you have a 30 year fixed rate in the high 6 percent range now is a great time to refinance into a 15 year fixed. Depending on your equity in the property and your credit score, you may find that you can refinance into a 15 year fixed with a payment that is not much more than what you are paying now. The advantages to this are simple, paying a 15 year fixed rate mortgage builds your equity much more quickly and allows you to pay off your home much sooner… For example, if you have a $200,000 mortgage at 6.75% your principal and interest (P & I) payment is $1,297. A 15 year fixed rate at 3.875% would give you a P & I payment of $1466, a difference of only $169 a month. What is important for homeowners to take note of is the difference in the paying down of the principal balance.
- After the first year, the 30 year fixed rate has paid down its balance by $2,316, while the 15 year fixed rate has paid it down by $7,486.
- After 5 years the 30 year fixed rate has paid down its balance by $15,491, while the 15 year fixed rate has paid down by $67,458.