Refinancing a 15-year mortgage can lower payments or reduce interest, but consider costs. It’s wise when rates drop, your credit improves, or you need lower payments. However, high fees or plans to move soon might negate savings. Refinancing a 15-year mortgage to a 30-year extends the loan, reducing payments but increasing total interest.
Why Refinance a 15-Year Mortgage?
People refinance for one reason: money. Whether it’s lowering monthly payments, reducing interest, or paying off the loan faster, it’s all about keeping more in your pocket.
But does it actually help? Sometimes, absolutely. Other times, not so much.
Here’s When Refinancing Makes Sense
- Your interest rate is too high: If rates have dropped since you first got your mortgage, refinancing your 15-year mortgage could mean a lower monthly payment and less paid in interest.
- You want to pay off your home faster: Maybe you started with a 30-year mortgage and now you want to speed things up with a 15-year loan.
- You need lower payments temporarily: If your budget’s tight and you need relief, refinancing to a longer-term loan (like switching to a 30-year) might free up monthly cash.
- You’ve improved your credit: Better credit means better rates. If your credit score has improved, you may qualify for a lower interest rate.
- You want to switch loan types: If you’re stuck with an adjustable-rate mortgage (ARM) and rates are rising, refinancing to a fixed-rate 15-year mortgage could bring stability.
When Refinancing a 15-Year Mortgage Might Be a Bad Idea
Refinancing isn’t always the right move. Sometimes, it costs more in fees than you’ll ever save.
Here’s when refinancing might not make sense:
- High closing costs: If the lender fees eat up all the savings, it’s not worth it.
- You’re moving soon: If you plan to sell your house in the near future, you might not be in the home long enough to recoup the refinancing costs.
- You’re too deep into your loan: If you’ve already paid off most of the interest, refinancing could reset the clock, making you pay more over time.
How Soon Can You Refinance a 15-Year Mortgage?
It depends on your lender. Some let you refinance right away, while others might have a waiting period. But here’s the real question—you should be asking whether refinancing actually makes sense for your situation. If you just got your mortgage six months ago and rates have barely changed, refinancing won’t do much. However, if interest rates dropped significantly and you’re still early in your mortgage, you might benefit.
The Costs of Refinancing
Refinancing comes with fees. Some are unavoidable. Others you can negotiate.
Expect these to show up:
- Application fees: Some lenders charge just to process your refinance.
- Appraisal fees: If they require a home appraisal, that’s another few hundred bucks.
- Loan origination fees: Similar to when you first got your mortgage, these fees cover the lender’s administrative costs.
- Title search and insurance: Lenders want to make sure the title is clear, and they’ll charge you for it.
Point is, refinancing isn’t free. So before you pull the trigger, do the math. If closing costs cost more than what you’d save, then refinancing a 15-year mortgage probably isn’t your best move.
FAQs
How many times can I refinance my 15-year mortgage?
Technically, as many times as you want. But every time you do, you’re paying fees, restarting the loan term, and potentially paying more interest over time.
Can I refinance my 15-year mortgage to a 30-year mortgage?
Yes, but it comes with trade-offs. Lower payments, but more total interest. Make sure the lower payments are worth it in the long run.
What credit score do I need to refinance?
Lenders usually want at least a 620 credit score for refinancing, though the best rates typically go to borrowers with 740 or higher.
Is refinancing worth it if rates only dropped by 0.5%?
Maybe. If your mortgage balance is high, even a small rate drop could save thousands over time.
Does refinancing hurt my credit?
It might dip temporarily because of the hard credit inquiry, but it usually bounces back.
Conclusion
Refinancing a 15-year mortgage is a financial tool that can be advantageous when interest rates are lower, your credit has improved, or you need temporary payment relief. However, it’s crucial to weigh the potential savings against the associated costs, including closing fees. Refinancing isn’t always beneficial, particularly if you plan to move soon or are late in your loan term. Carefully evaluate your specific circumstances and do the math to ensure refinancing aligns with your financial goals.