How Does a 15 Year Fixed Mortgage Work

While the promise of their lower monthly payments can be tempting, 30 year mortgage terms will cost a homeowner a huge sum in interest payments over the life of the loan. This is because the monthly payments on 30 year mortgages are made over a longer period of time, and because the principal is paid off slower, the interest payments are higher.

As an alternative, you can opt for home purchase and refinance loans for 15 years instead of 30. While the monthly payments on 15 year mortgages are higher than the payments for 30 year mortgages, they offer enormous savings over the life of your loan because less interest is being paid.

Refinancing Your 15 Year Fixed Mortgage

If your income has improved since you first purchased your home and you can afford higher monthly payments in exchange for greater interest savings, then refinancing your 15 Year Fixed mortgage may be a valuable option for you. Refinancing also offers the opportunity to lock in a lower fixed rate if interest rates are low, or if your credit score has improved.