Compare Rates on a 15-Year Fixed-Rate Refinance
If you’re considering a refinance with a 15-year term, one of the shortest time frames possible, you might have crunched the numbers. Or maybe you’re just not overly interested in being locked in with another three decades of debt. Whatever the case may be, if you’re in a position to take on a 15-year fixed-rate refinance, you could see some notable financial advantages.
That’s only true if you’re really in a position to handle this shorter-term loan, though. Refinancing into a 15-year loan means higher monthly payments than if you went the traditional 30-year route. As a result, you should only choose this kind of refi if you’re confident it’s right for you.
To help you weigh your options, let’s dig deeper into the 15-year fixed-rate refinance and what it could mean for your financial future.
What is a 15-year fixed-rate refinance?
Before we talk about the details of this kind of refi, let’s talk about refinancing in general. It’s a common misconception that this process changes the details of your current mortgage. It doesn’t.
Instead, when you refinance, you completely replace your current home loan with a new one. You basically take out the new mortgage (the refinance), then use all or part of it to pay off the balance of your old mortgage.
Because you’re essentially starting over, you have tons of options. If you’re currently in a 15-year mortgage and the payments feel too steep, you don’t need to refi into another 15-year loan. Choosing a longer loan term would add more breathing room to your budget.
On the other hand, if you’re in a longer-term loan like a 20 or 30-year mortgage, choosing the shorter 15-year loan can change a lot for you. It increases your monthly payments, but the shorter repayment timeline should save you hundreds of thousands of dollars in interest. On top of that, lenders see shorter loans as lower risk, so they should offer you a lower interest rate, too.
And because this kind of refi comes with a fixed interest rate, you’ll get predictability to help you budget for those bigger payments. With a fixed-rate refi, the interest rate never changes, so your monthly payments stay mostly the same. The only fluctuation you’ll see is a little movement if things like your property taxes change.
The pros and cons of a 15-year fixed-rate refinance
Before you lock into the relatively aggressive 15-year timeline on your refinance, you should weigh the potential gains against the challenges that can come with this kind of home loan.
Pros of a 15-year fixed-rate refinance
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When compared to a 30-year refi, you can probably save hundreds of thousands of dollars in interest with a 15-year loan. (Our amortization calculator, which shows how you pay off the loan interest over time, can give you an estimate for how much you’d save.)
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Because lenders see shorter loans as less risky, you can likely qualify for a better interest rate than you’d get with a 30-year refinance for the same amount of money.
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The more aggressive repayment timeline helps you build equity faster. This can be particularly helpful if you’re liquidating some of your current equity with a cash-out refinance.
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The fixed interest rate on your refinance gives you predictably monthly payments. If you’ve been in an adjustable-rate mortgage (ARM), your refinance should make budgeting a lot easier.
Cons of a 15-year fixed-rate refinance
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The shorter loan term means you have less time to pay down your balance. As a result, your monthly payments will be higher than if you chose a longer-term refi.
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Because the monthly payments go up with a 15-year repayment term, when lenders measure your debt-to-income (DTI) ratio, it’ll be higher, too. That can make it harder to qualify for the loan or result in being charged a higher interest rate.
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The bigger monthly payments can make it harder to save money and prevent you from investing. Weigh the opportunity cost.
How to compare 15-Year Fixed-Rate Refinance mortgage rates
If you only take one piece of advice when you’re getting a mortgage, let it be this: compare rates from at least three different lenders. Doing so can save you thousands of dollars over the life of your loan.
To make it easier for you to put the work in here, follow these steps:
Step 1: Understand your borrower profile
First, you want to get a handle on how mortgage lenders are going to see you. If you look like you’re going to be able to repay your home loan fairly easily, they’ll offer you more favorable conditions. If you look high-risk, you’re going to pay more for your mortgage. Specifically, you’ll be charged a higher interest rate.
So, what makes a borrower low- or high-risk? To decide what kind of loan to offer to you (if any), lenders look at a lot of factors. The biggest ones here include:
- Your monthly income — you don’t want an overly large chunk to have to go toward paying your monthly mortgage bill, which lenders measure with your debt-to-income (DTI) ratio
- Your credit score, which essentially tells them how good you’ve been with managing money in the past
- Your loan-to-value (LTV) ratio (higher is riskier) — the price of the house and your down payment size both come into play here
If you’re not in good shape in any of these areas, putting in some work before you buy (e.g., working on your credit score, lowering your DTI ratio) can help you get a lower interest rate.
Step 2: Use rate tables to see what’s on offer today
There are lots of resources online that show you rate offers from leading lenders. Use a mortgage rate table to get a feel for what kind of interest rates are available from financial institutions that provide home loans in your area.
Ideally, that rate table lets you input personal information, like your credit score and the price of the house you want to buy. This way, the rates you get shown should align with what you’re actually eligible to get. A lot of lenders advertise low starting rates, but only the “best” borrowers will be approved for them once they apply.
Step 3: Get preapproved with three lenders
Once you’ve picked out a few lenders that look good to you, go through their preapproval process. That will mean filling out some paperwork, but it’s the best way to figure out what you can really qualify for in terms of loan size and interest rate.
Have financial documents — like your bank statement and pay stubs — handy to make it easier to complete your preapproval applications.
Step 4: Compare preapprovals
When you get preapproved, the lender should give you documentation about your potential mortgage. Ideally, this gives you a feel for the total amount you’re borrowing, the repayment term, the interest rate, fees, and closing costs.
Line up your quotes from each lender and go through them, paying special attention to the annual percentage rate (APR). This tells you how much you’ll pay each year for the loan including not just interest, but also fees. By looking at APRs, you get a clear idea of what you’ll truly pay if you choose that specific mortgage. This helps you identify the best option for yourself and your financial goals.
If you’re ready to start comparing 15-Year Fixed-Rate Refinance rates, use our rate table to get started. We have fields up top where you can input key details like your credit score range and zip code so we can best tailor the mortgage rate offers to you.