When to refi 30year to a 15 year?

What would the 15 year fix rate have to be in order to refi a 30 year loan at 4.125 rate with 26 years remaining ?

I am 58 years old thought it would make better sense...

2 Answers

Um... I am not quite sure what you are getting at. Generally speaking, a 30 year loan will require you to pay nearly 2x the purchase price when all payments are made. Financing at 15 years means that you will pay considerably less in interest and build equity much faster.

But, if you have a rate at 4.125 and it is fixed, why change that beauty? Just calculate what your payments would need to be using that interest rate on a 15 year amortization and start making those payments. The amount above and beyond your 30 year payment will go straight to the principle and you will effectively have "refinanced" to a 15 year loan without closing costs and without the pressure. If finances go sour, you can always just shift back to the 30 year payment amount.

There's no doubt that the interest saved by paying mortgages off over 15 years is substantial, but it is certainly possible to accomplish the same thing by making additional principal payments. 15 year "best execution" rates are now in the low 3's, which is certainly appealing. Your best comparison would be to get a cost estimate on going to a 15 year loan, look at the monthly payment for P&I, then compare with the payment to pay off your current loan balance (at current rate), amortized over 15 years. You'll likely pay somewhat less interest by dropping the rate, but without knowing the costs involved (which vary widely from state to state), your current loan balance (the lower it is, the less the benefit of refinancing), and your current/future cash flow and debt projections, it's not possible to give a meaningful answer. Hope that helps. I write loans nationally, feel free to let me know if you have any other questions. Thanks, Ted