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PyraMax Stories & Articles

When it comes to managing your finances, there's a lot to know, and it seems as if things are changing every day! We love educating our customers, and that's why we maintain a thorough selection of stories and articles.

Should I Refinance to a 15 Year Mortgage?

One of the most common questions that has been asked recently is whether a client should refinance to a 15 year mortgage.  Many people anticipate interest rates will rise soon and feel that they might not get another opportunity at rates comparable to what is currently available. The answer would depend on a few factors; the rate that they currently have, what rate they could get by refinancing, how many payments they are reducing their current term by, what the cost of refinancing would be and most importantly, if they can afford the higher payment or not.  

As long as the payment is affordable and the current rate isn't similar to what they'd get by refinancing, the answer is almost always yes.

15 year mortgage rates are typically 0.75% - 1% lower than 30 year mortgage rates.  In the scenario below, the borrower has 29 years remaining with a current rate of 4.25% (a common rate for someone who purchased in 2014) and owes $250,000. 

 Current scenario with 29 years remaining at 4.25% fixed rate:

 Refinancing $250,000 at a 2.875% fixed interest rate, 2.99% APR for 15 years:
 348 monthly payments remaining at $1250.94 (principal & interest payment) for a total of $435,327.12 over the life of the mortgage 180 monthly payments at $1711.46 (principal & interest payment) for a total of $308,062.80 over the life of the mortgage    

This would save this particular borrower $127,264.32 by refinancing into a 15 year mortgage and thus is something they should strongly consider as long as they are comfortable with the higher payment, and they aren't paying a large amount of closing costs.  Some clients are understandably hesitant to pay a second set of closing costs this soon after taking out the initial mortgage. PyraMax Bank can always do mortgage with no closing costs at a higher rate if that makes more sense for your situation. Please contact one of our loan officers if you'd like to go over your scenario. 

All loans subject to credit approval. Rates are subject to change at any time without notice. Down payment of 20% is required without PMI insurance. The monthly principal and interest payment needed to amortize a $250,000 loan at 2.875% over 15 years would be $1711.46 or $6.85 per $1,000 borrowed. This is only an illustrative example and is not intended to reflect the terms of an actual loan. PyraMax Bank is an Equal Housing Lender, Member FDIC.

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