This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Refinancing To A 15-year Mortgage Saves Big Money





If you're one of the millions who have decided to refinance to take advantage of record-low mortgage rates, you would be remiss if you didn't also consider refinancing to a shorter-term loan.

Refinancing your 30-year mortgage into a 15-year loan might mean a higher monthly payment, but it will allow you to save thousands on interest and pay off your mortgage much sooner. Not only does the shorter term mean fewer interest payments, 15-year loans have significantly lower interest rates than their conforming counterparts.

"Borrowers could obtain even lower rates by choosing a 15-year fixed-rate mortgage, which averaged below 2.93 percent in 2012," says Leonard Kiefer, deputy chief economist at mortgage giant Freddie Mac in McLean, Va. "This was the lowest annual average for the 15-year fixed-rate mortgage since we began keeping track of the product in 1991."

"HSH.com has tracked 15-year fixed-rate mortgages since early 1986," says Keith Gumbinger, vice president of HSH.com. "These are not only record lows, but are less than half the interest rate available as recently as 2008, and, remarkably, more than eight percentage points below those 1986 rates. It would be hard to imagine a better time to take one of these short-term loans."

Those rock-bottom mortgage rates have made shorter-term loans positively trendy. A recent Freddie Mac report found that 27 percent of borrowers who refinanced in the fourth quarter of 2012 shortened the term of their loan, while 69 percent kept the same term and only 4 percent lengthened the term.

To understand how a shorter-term loan saves you money over the long term, compare a 30-year, $200,000 loan at 3.5 percent, to a 15-year, $200,000 loan at 2.9 percent. The monthly payment on the 30-year term was $898 and with a total interest expense of $123,312. The 15-year loan has a monthly payment of $1,371 and a total interest expense of $46,881. The monthly payment is $473 higher for the 15-year term, but the interest saved amounts to $76,431.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,300.33 -80.08 -0.49%
S&P 500 1,884.48 -2.28 -0.12%
NASDAQ 4,256.3440 -2.0940 -0.05%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs