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15 Year Fixed Rate Mortgages
Should you go out and refinance your existing thirty-year fixed rate mortgage into a 15 year fixed rate mortgage? Or, stick with what you have? Many people over the last 10 years have made the plunge and have purchased real estate. For many of these folks, the decision is easy. Their original mortgage was either me or variable rate mortgage war an option arm loan. For these people moving from anything that could remotely sounds like war looks like a variable payment is priority number one.
For those people who already have a fixed rate mortgage the decision is not as clear. For the average individual there are many different factors that contribute to such a decision. The first factor in the balls be fixed interest rate that is currently being paid. Get that fixed interest rate is significantly higher than what current market rates are, and then there is a strong financial incentive to look further. The second factor relates to the amount of time remaining on the current mortgage. Yes the mortgage is only a couple of years old, chances are that the majority of the homeowner’s payment is being applied towards interest and not principal.
Yet another factor that is important lies solely with the owner. That factor is the additional amount of time the owner is willing to stay in pain or continue to own it. If the owner plans on keeping it for more than five years, it probably makes sense to look into a shorter term duration loan. The final factor that influenced his decision news the actual payment amount that needs to be made every month. If, by converting to a 15 year rate mortgage the payment goes up as dramatically, this is a significant negative. It could preclude the current owners from making such a movie financed decision. However it by converting to have the team year fixed rate mortgage at a much lower interest rate than the current loan there is a strong possibility that the payment amount will be very near the amount of the original loan.
Regardless of whatever decision is made it is important to take into account the closing costs associated with moving to and loan. If the closing costs are significant, they can completely wipe out any Mac games associated with a lower interest rate for a period of years. This is what they call the payback period. For example if moving to a new loan reduces the monthly payment by $300 but the closing costs are $3600, it will take the current owners one year to break even on refinance. If the owners are planning on staying in the property or owning property or more than one year the hassle and expense associated with refinance is worth it.
In summary, before moving to a 15 year fixed rate mortgage, consider the factors listed above.
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