If you've been paying on a mortgage for quite a few years but want to refinance, consider getting a 15-year loan so you don't end up paying more than you should. Here's why a 15-year mortgage could be a good deal right now.
Rock bottom mortgage rates
Mortgage rates are at or near historical lows. The average rate for a 15-year fixed mortgage was 3.26 percent as of September 17, 2011, according to HSH.com. At that interest rate, the monthly payment for a 15-year mortgage of $200,000 would be $1,406.31.
Refinancing to lower interest
You can cut the amount of interest paid out over time by refinancing into a 15-year mortgage rather than a 30-year loan. But depending upon how much you still owe, you'll likely end up with a larger monthly payment than with a 30-year mortgage. If you have enough income to cover the extra payments you should be okay with the 15-year loan.
But if you are concerned about struggling to keep up with the higher payments, you could always refinance into a 30-year loan and just pay what you would have each month if you had gotten the 15-year mortgage. Either way, the goal should be to cut down on the amount of interest paid out over the life of the loan.
Popularity of 15-year mortgages
There's definitely been a surge of homeowners taking advantage of the low rates to refinance into 15-year mortgages. "It's all the trend right now. Most borrowers are asking about switching to a 15-year-loan. Everybody's in a mood now to get those mortgages paid off. They want to see an end to those payments, and that's what's driving it," Kristine Marr, a senior loan officer with RPM Mortgage in Walnut Creek, said in a Contra Costa Times article.