Goal 2: Shorten the life of your loan for long-term savings.
Want to save money over the long term and speed your way to debt-free living? You might want to refinance to shorten your loan terms. Low interest rates make this a great time to take advantage of the savings.
If you refinance from a 30-year mortgage to a 15- or 20-year mortgage, your monthly payments might go up. However, you’ll save on interest over the life of your loan — and be mortgage-free years ahead of your original schedule.
In this example, “Maria” is considering the following refinancing options.
In 2015, Maria took out a $200,000, 30-year mortgage. Her interest rate was 3.9%.
Refinance option 1:
If Maria refinances in 2020, moving to a 20-year mortgage at a 2.75% interest rate, her monthly payment increases by $38.
- $17,567 in interest over loan period
- 5 years of mortgage payments
Refinance option 2:
If Maria refinances in 2020, moving to a 15-year mortgage at a 2.625% interest rate, her monthly payments increase by $274.
- $23,675 in interest over the life of the loan
- 10 years of mortgage payments
See how your savings could add up with a shorter loan term.