If you want to refinance your existing 30-year, fixed-rate mortgage, your first thought is probably to refinance into another 30-year home loan.
But with interest rates so low, you should also take a look at refinancing into a 15-year, fixed-rate mortgage. Here are the major differences between the two options.
When you refinance into a 30-year mortgage, you’re basically starting over.
If you aren’t that far into your mortgage, you’ve mostly been paying interest.
True, you are starting over with a somewhat smaller principal balance (as long as you aren’t doing a cash-out refinance), but you’re back to having 30 years of mortgage payments ahead of you.
Despite this drawback, you could save in the long run if your new interest rate is significantly lower than your old one, especially if you keep your mortgage for a long time.
But there might be a better option. Learn more about it in my Mortgage-Calc.com article, Save money by refinancing into a shorter-term mortgage.