15 yr mortgage rates

katiekessler123

My husband and I are thinking of refinancing to a 15 yr mortgage instead of a 30 yr.  As a bit of back story, I originally purchased our house on my own about 2 yrs ago and felt I could not afford to do a 15 yr on my own.  Now that I am married we feel that we can def. more than afford to switch to a 15 yr. We've stayed in the same house and plan to keep this as our forever house, so I feel like it may be very worth it.  We've already done some research and it seems like our interest rates will also go down from 3.5 to 2.8.  We plan on contacting our mortgage company about this this week, but I was just curious if anyone out there has switched from a 30 yr to 15 yr.  Did your interest rates go down?  

lyndausvi

Depending on the closing costs and the interest rate you might get I might consider just keeping the 30 year but pay a 15 year payment to bang it out sooner.  That way if something pops up you can go back to the lower payment if needed.    

But really until you know the rate you can get and run the numbers it's hard to say.

jenna8984

You likely won't get the rates posted online. Many of the 30 year right now are saying 3.5 yet I'm in the buying process and that rate is only if you put 50% down. So I'm not saying you won't get better rate, but you likely won't get the one advertised. I think Lynda made a good point though, depending how much the closing costs are, you might be better of just making the extra principle payments instead. That way if one of you gets laid off, you can still afford it without too much stress.

LabLove86

I was going to say what Lynda just did - if you can afford more then just pay more each month. But if something comes up you can go to a lower payment. Those closing costs can be a lot of extra money - and thats something a friend of mine didn't consider when attempting to do exactly what you're talking about. 

One of the things our mortgage broker told us was that if you pay your monthly payment as is, then once that clears and you want to do an additional payment that month - you can just make sure you click the "apply directly to principle" and that will help to greatly reduce your monthly payments. They said if you do this one month a year (pay the full mortgage amount twice - but the second time JUST on the principle), on a 30 year mortgage, it will drop it down by 8 years! Which seems so crazy (and almost unrealistic) to me, but he assured us that its true. 

Just make sure you do all of the research and choose the best option for you and your finances. 

katiekessler123

We already own the house so the closing costs are a non-issue, but you are all bringing up a good point about possibly just making the higher payments without switching.

LabLove86

katiekessler123 said:

We already own the house so the closing costs are a non-issue, but you are all bringing up a good point about possibly just making the higher payments without switching.

A lot of times the require a deposit of closing costs to refinance. Which is why my friend I mentioned decided not to switch to a 15 yr mortgage. They now just pay what would have been the 15yr cost.

katiekessler123

Ahh..interesting. I didn't read that in any of the articles I've read about switching.  I'll see what the mortgage company says about that, but thanks for the heads up. Also, VERY interesting what you said about making the second payment once a year.  Also have never heard that, either.  We do already pay more on the principle each month then needed, but I have never heard that approach.

jenna8984

katiekessler123 said:

We already own the house so the closing costs are a non-issue, but you are all bringing up a good point about possibly just making the higher payments without switching.

Um yea if you're thinking there's not closing costs- there are. Generally 50-75% as much as when you got the house. So if you paid 5k in closing costs then, it could likely be $3500 in fees now.

huskypuppy14

I don't think 3.5 to 2.8 is enough to refinance. You should just pay the extra principal each month. 

People would refinance when they had like a 7% interest rate. The interest rates now are so low, that I would just leave it.

littlemushroom

We are in the process of getting a 30 year mortgage. Paying an extra $200-$300 a month applied directly to principle allows us to pay off the mortgage in half the time. We are looking at a less than 150k mortgage though. Chase bank has a free online calculator which allows you to see how much you save in interest and how much you can pay it off early depending on the extra monthly payment applied to the principle, which is how we are determining how much extra a month to put down.

katiekessler123

Yes, we also have a low mortgage and are putting about $100 extra toward the principle each month.  After calculating what our monthly principle payments would be if we switched to 15 yr, it would be a little more than $200 extra a month, so we are already paying half of the extra.  You're all giving me some good food for thought about just paying the extra principle as if we had switched, but not actually making the switch.  

lyndausvi

katiekessler123 said:

We already own the house so the closing costs are a non-issue, but you are all bringing up a good point about possibly just making the higher payments without switching.

yeah, most refinancing has fees associated with them.   So definitely look into those fees.   You might have to pay for things like appraisals, title searches and other administration fees.  

theartistformerlyknownas

huskypuppy14 said:

I don't think 3.5 to 2.8 is enough to refinance. You should just pay the extra principal each month. 

People would refinance when they had like a 7% interest rate. The interest rates now are so low, that I would just leave it.

This. Not a big enough difference to me to make it worthwhile.

H paid about $600 extra toward the principle on his/our house each month for years and it put us in a great position to sell, but then we were still able to kick the payments back down to the minimum to save everything we could toward our new house the past few months.