Refinancing Tips · April 28, 2025
Refinancing to a 15-Year Mortgage: Is It Worth It?
Refinancing from a 30-year to a 15-year mortgage dramatically reduces total interest paid — but comes with a higher monthly payment. Here is how to decide.
Refinancing from a 30-year to a 15-year mortgage is one of the most powerful financial moves available to homeowners with adequate cash flow. Here is how to evaluate it.
The Rate Advantage
15-year fixed rates are typically 0.50-0.75% lower than 30-year fixed rates. This is a meaningful structural advantage — not just a shorter term.
The Numbers on a $280,000 Balance
Continuing on a 30-year at 7.0% (remaining balance): Monthly payment $1,864. Remaining interest: $250,000+.
Refinancing to 15-year at 6.25%: Monthly payment $2,401. Total interest: $152,000. Interest savings: $98,000+. Monthly cost increase: $537.
The Payoff: $537/Month Buys $98,000 in Interest Savings
Over 15 years, you pay an extra $537/month = $96,660. In return, you save $98,000+ in interest AND own your home 15 years sooner.
Who This Makes Sense For
Borrowers whose income has grown since the original purchase. Those who can comfortably handle the higher required payment. Borrowers who are 5-10 years into a 30-year and want to accelerate payoff. People approaching retirement who want to eliminate mortgage debt before stopping work.
The Flexibility Alternative
If the higher required payment of a 15-year feels risky, take the 30-year and make voluntary extra payments toward principal. You get flexibility while still accelerating payoff.
The Break-Even on Refinance Costs
Refinance closing costs ($5,000-$7,000) divided by monthly payment increase ($537) = 9-13 months break-even. After that, every month you are building equity faster and saving interest.
HMS models 15-year vs. 30-year refinance comparisons. Call 309-222-8286.