How Get the Lowest 15-Year Mortgage Rate for Your Refinance

With mortgage rates remaining at an all-time low, refinancing still is top of mind for many homeowners. And even though a 30-year fixed-rate mortgage might be the typical first choice among most borrowers, refinancing to a 15-year mortgage not only can shorten your mortgage term, but it also can keep you from paying additional interest.

Keep in mind the monthly payments with a 15-year loan can be more expensive, but the interest rates are lower. If this makes you consider a 15-year mortgage, here are three suggestions on how you can get the best deal.

1. Run the numbers on 15- and 30-year loans

Start out by comparing the current average rates between the two loans. If 15-year mortgage rates don’t seem substantially lower, it may not be worthwhile to accept the higher monthly payment that comes with the shorter-term loan.

But, the long-term savings can be considerable. Freddie Mac reports that rates currently are averaging 2.81 percent for a 30-year fixed-rate mortgage versus 2.32 percent for the 15-year option.

So, if you’re trying to decide whether to refinance a $200,000 mortgage balance for either 15 or 30 years at today’s average rates, your monthly payment would be $1,317 with a 15-year mortgage at 2.32 percent, but only $823 with a 30-year loan at 2.81 percent. However, you would wind up paying a total interest of about $37,000 with the shorter-term loan versus about $96,400—$59,400 more—during the life of the 30-year mortgage.

2. Be the best borrower you can be

Before you begin the mortgage application process, you’ll want to check your credit score. Your lender wants to feel confident that you’ll repay the loan and not default—especially at a time when so many people are experiencing financial difficulties due to the coronavirus pandemic. A very good (740 to 799) or excellent (800 or higher) credit score will help provide that assurance.

If your score could stand some improvement, request a copy of your report from the three major credit reporting bureaus—Equifax, TransUnion, and Experian—and make sure they’re accurate. Inaccurate information, such as debts that aren’t yours or debts that are too old and should have fallen off the reports, can weigh down your credit score. Boost your score by paying down debt (especially credit card balances), paying bills on time, and not opening new credit accounts while you’re house-hunting.

3. Pay as much as you can upfront

Don’t have much equity in your home? Making a larger down payment on your refinance loan can help you get an extremely low 15-year mortgage rate for your refi. Just like a decent credit score, a more substantial down payment is a way of demonstrating to the lender that you’re a good risk and deserve a low rate.

If you’re heavily invested in your house, it’s less likely you’ll walk away from your mortgage. Plus, making a down payment large enough to give you at least 20 percent equity in your home will help you avoid private mortgage insurance.

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