Mortgage  Question?
Should I refinance 30 year mortgage with 15 year loan?

Should I refinance a 30 year mortgage into a 15 year mortgage if I am only going to keep the home for two more years? I am eight years into my current mortgage and the monthly payment on the new 15 year loan will be the same.

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

Refinancing your current 30 year mortgage into a new 15 year mortgage while maintaining your current monthly payment makes financial sense. We recommend that you refinance your mortgage even if you plan on owning the home for only a couple of years.

The reason refinancing makes sense in your situation is because you are reducing the length of your mortgage which means you pay off your mortgage balance faster and reduce your total interest expense over the life of your loans. The best way to think about it is with your current mortgage, it would take you 30 years to pay off your loan, if you make the regularly scheduled payments. If you refinance into a 15 year mortgage it would only take you 23 years to pay off your mortgage (8 years of paying current mortgage + 15 years of your new loan = 23 years to pay off mortgage). Taking a 30 year mortgage and effectively making it a 23 year mortgage saves you seven years of mortgage payments and likely thousands of dollars in interest expense. Refinancing makes even more sense because you maintaining and not increasing your monthly mortgage payment.

Refinancing still makes financial sense even if you plan on selling your home and paying off your new 15 year mortgage within a couple of years. This is because a 15 year mortgage enables you to pay down your mortgage balance faster than a 30 year loan, which means you build equity in your home faster. For example, paying your new 15 year mortgage for two years reduces your mortgage balance more than paying your existing 30 year mortgage for two more years. The faster your pay down your mortgage, the more equity you have in your home when you sell it.

Because you may only have your new mortgage in place for a relatively short period of time you should focus on keeping your closing costs low when you refinance. Please note that there is usually a trade-off between your mortgage rate and closing costs, with the lower your closing costs, the higher your mortgage rate, so you need to find the right balance. You can use our Mortgage Refinance Calculator to compare mortgages with different interest rates and closing costs to determine the lender and loan that are right for you.

Finally, we always recommend that you shop multiple lenders to find the mortgage with the lowest rates and fees. You can review lenders in your area by clicking INTEREST RATES There are several lenders on FREEandCLEAR offering 15 year mortgages with interest rates significantly lower than the rate you referenced in your question.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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