15 year or 30 year Refinance? | Aspire
15 year or 30 year refinance

15 year or 30 year Refinance?

January 14, 2022

When looking to refinance a mortgage, one of the biggest questions most homeowners ask is… Should I get a 15 year or 30 year term? Refinancing your mortgage can potentially save you money on your monthly mortgage payments and on the total interest paid over the life of the loan.

Making the decision between a 15 year or 30 year fixed rate mortgage all comes down to what is best for your needs. If your priority is saving the most money on interest and paying off the loan as quickly as possible then a 15 year mortgage term may be your best choice. However, if you would like to have lower monthly mortgage payments and a bit more flexibility in your budget, a 30 year mortgage term could be a better choice.

Let’s take a look at the top reasons why homeowners choose a 15 year or 30 year mortgage:

 

Why homeowners choose a 15 year mortgage term

Lower Interest Rate

A 15 year mortgage often offers a lower interest rate than a 30 year mortgage. If you can afford the higher monthly payments of a 15 year fixed rate mortgage, then you can save money on the amount of interest you pay each month. This also means you will pay less interest over the 15 year term of the loan.

Faster Pay-off

Perhaps the most simple and obvious answer to why homeowners choose to refinance to a 15 year mortgage term is faster pay-off. The goal of many homeowners is to be free of debt as soon as possible. A 15 year fixed rate mortgage structures your payments to pay off the total balance of your mortgage in half the time of a 30 year mortgage.

Total Savings

With a lower interest rate and the structured faster payoff term, a 15 year fixed rate mortgage is likely the cheapest money you can borrow on a residential property. When you compare a 15 year mortgage to a 30 year mortgage of the same loan amount you can save on both the monthly cost of interest and the total amount of interest paid over the life of the loan, by choosing a 15 year mortgage term.

Interest can be thought of as the cost of borrowing money. Shortening the amount of time you borrow money for a large purchase like a home, can have significant savings. Refinancing to a 15 year mortgage term is a great way to save money on the total amount of interest due. This is why a number of home owners choose to refinance their mortgage to a 15 year term, when the opportunity is right for them.

 

Why homeowners choose a 30 year mortgage term

Lower Monthly Payments

The 30 year mortgage term is by far the most popular choice for American homeowners. This choice is often due to keeping the monthly mortgage payments affordable. The lower monthly payment that is available with a 30 year fixed rate mortgage is often more feasible to homeowners than the 15 year option.

No Pre-Payment Penalties

Just because you have a 30 year fixed rate mortgage, doesn’t mean that you have to take 30 years to pay it off. There are no pre-payment penalties on mortgages in the US after the first 3 years of payments. If you chose to pay an extra amount each month toward your principal balance, you could pay off a 30 year mortgage sooner.

Overall Budget Flexibility

There are a few ways that refinancing to a 30 year mortgage can be a good financial decision. Dropping mortgage insurance, using cash from your equity to pay off higher interest debt, and adding flexibility to your budget are all great reasons to refinance. Having a more flexible budget each month allows you the freedom to utilize your income in other ways.

Homeowners that choose a 30 year term instead of a 15 year term on their mortgage may be considering other short term uses of their income than paying off a mortgage as quickly as possible. Making home improvements, financing higher education, or making other types of investments could all be great reasons to choose the lower monthly payment of a 30 year fixed rate mortgage.

 

Is a 15 year or 30 year mortgage better for you?

Choosing 15 year or 30 year term involves making a decision on what fits your current financial needs. Do you prefer the flexibility of a 30 year mortgage or would you rather structure your payments to a 15 year mortgage term to ensure a faster pay-off with savings on the cost of interest?

A “Fixed Rate” mortgage has structured payments that keep the amount of your principal and interest payment on your mortgage the same each month for the full term of the loan. The difference between choosing  a 15 year or 30 year fixed rate mortgage refinance often comes down to the monthly payment amount.

Use our refinance calculator to compare the estimates for your monthly mortgage payment with a 15 year and 30 year term.

 

We hope that this article shed some light on the differences between choosing a 15 year or 30 year fixed rate mortgage term. If you are looking to refinance your mortgage and would like to take a look at your best options, that is what we are here for!

Speak to one of our licensed mortgage consultants about getting a customized loan estimate on your 15 year or 30 year refinance. Our goal is to help you access the best mortgage options available to you. Reach out to us to get started today.

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