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Forbes
an hour ago
- Business
- Forbes
Mortgage Rates Today: June 6, 2025 - 30-Year Rates Steady, 15-Year Rates Down
Currently, the average interest rate on a 30-year fixed mortgage is 6.76%, compared to 6.85% a week ago, according to the Mortgage Research Center. For borrowers who want to pay off their home faster, the average rate on a 15-year fixed mortgage is 5.74%, down 2.03% from the previous week. If you're thinking about refinancing to lock in a lower rate, compare your existing mortgage rate with current market rates to make sure it's worth the cost to refinance. Today, the average rate on a 30-year mortgage is 6.76%, compared to last week when it was 6.85%. The APR on a 30-year, fixed-rate mortgage is 6.79%. The APR was 6.88% last week. APR is the all-in cost of your loan. With today's interest rate of 6.76%, a 30-year fixed mortgage of $100,000 costs approximately $649 per month in principal and interest (taxes and fees not included), the Forbes Advisor mortgage calculator shows. Borrowers will pay about $134,477 in total interest over the life of the loan. Today's 15-year mortgage (fixed-rate) is 5.74%, down 2.03% from the previous week. The same time last week, the 15-year, fixed-rate mortgage was at 5.86%. The APR on a 15-year fixed is 5.78%. It was 5.91% a week earlier. A 15-year, fixed-rate mortgage with today's interest rate of 5.74% will cost $830 per month in principal and interest on a $100,000 mortgage (not including taxes and insurance). In this scenario, borrowers would pay approximately $49,802 in total interest. Today's average interest rate on a 30-year fixed-rate jumbo mortgage (a mortgage above 2025's conforming loan limit of $806,500 in most areas) fell 4.29% from last week to 7.18%. Borrowers with a 30-year, fixed-rate jumbo mortgage with today's interest rate of 7.18% will pay approximately $678 per month in principal and interest per $100,000 borrowed. That would be $144,315. Mortgage rates initially trended downward post-spring 2024. However, they surged again in October 2024—despite cuts by the Federal Reserve to the federal funds rate (its benchmark interest rate) in September, November and December 2024. Rates began to drop again in mid-January 2025, but experts don't forecast them falling by a significant amount in the near future. Mortgage rates are influenced by various economic factors, making it difficult to predict when they will drop. Mortgage rates follow U.S. Treasury bond yields. When bond yields decrease, mortgage rates generally follow suit. The Federal Reserve's decisions and global events also play a key role in shaping mortgage rates. If inflation rises or the economy slows, the Fed may lower its federal funds rate. For example, during the Covid-19 pandemic, the Fed reduced rates, which drove interest rates to record lows. A significant drop in mortgage rates seems unlikely in the near future. However, they may decline if inflation eases or the economy weakens. To get an estimate of your mortgage costs, using a mortgage calculator can help. Simply input the following information: Mortgage interest rates are determined by several factors, including some that borrowers can't control: While the above factors set the base interest rate for new mortgages, there are several areas that borrowers can focus on to get a lower rate: As you compare lenders, consider getting rate quotes for several loan programs. In addition to comparing rates and fees, these programs can have flexible down payment and credit requirements that make qualifying easier. Conventional mortgages are likely to offer competitive rates when you have a credit score between 670 and 850, although it's possible to qualify with a minimum score of 620. This home loan type also doesn't require annual fees when you have at least 20% equity and waive PMI. Several government-backed programs are better when you want to make little or no down payment: Comparing lenders and loan programs is an excellent start. Borrowers should also strive for a good or excellent credit score between 670 and 850 and a debt-to-income ratio of 43% or less. Further, making a minimum down payment of 20% on conventional mortgages can help you automatically waive private mortgage insurance premiums, which increases your borrowing costs. Buying discount points or lender credits can also reduce your interest rate. Most rate locks last 30 to 60 days and your lender may not charge a fee for this initial period. However, extending the rate lock period up to 90 or 120 days is possible, depending on your lender, but additional costs may apply. A mortgage interest rate reflects what a lender is charging you on top of your loan amount in return for allowing you to borrow money. Annual percentage rate (APR), on the other hand, is a calculation that includes both a loan's interest rate and finance charges, expressed as an annual cost over the life of the loan. In other words, it's the total cost of credit. APR accounts for interest, fees and time. Since APRs include both the interest rate and certain fees associated with a home loan, the APR can help you understand the total cost of a mortgage if you keep it for the entire term. The APR will usually be higher than the interest rate, but there are exceptions.
Forbes
an hour ago
- Business
- Forbes
Today's Mortgage Refinance Rates: June 6, 2025
The rate on a 30-year fixed refinance fell to 6.84% today, according to the Mortgage Research Center. The 15-year, fixed-rate refinance mortgage average rate is 5.74%. For 20-year mortgage refinances, the average rate is 6.63%. Related: Compare Current Refinance Rates The current 30-year, fixed-rate mortgage refinance average rate stands at 6.84%, versus 6.9% last week. The annual percentage rate (APR) on a 30-year, fixed-rate mortgage is 6.87%, lower than last week's 6.93%. The APR is the all-in cost of a home loan—the interest rate including any fees or extra costs. At the current interest rate, borrowers with a 30-year, fixed-rate mortgage of $100,000 will pay $655 per month for principal and interest, according to the Forbes Advisor mortgage calculator. That doesn't include taxes and fees. Over the life of the loan, the borrower will pay total interest costs of about $136,302. The 20-year fixed mortgage refinance average rate stands at 6.63%, versus 6.77% last week. The APR, or annual percentage rate, on a 20-year fixed mortgage is 6.67%. It was 6.81% last week. At the current interest rate, a 20-year, fixed-rate mortgage refinance of $100,000 would cost $753 per month in principal and interest. That doesn't include taxes and fees. That borrower would pay roughly $81,291 in total interest over the life of the loan. For a 15-year fixed refinance mortgage, the average interest rate is currently 5.74%. The same time last week, the 15-year fixed-rate mortgage stood at 5.84%. The APR, or annual percentage rate, on a 15-year fixed mortgage is 5.78%. Last week, it was 5.89%. Based on the current interest rate, a 15-year, fixed-rate mortgage refinance of $100,000 would cost $830 per month in principal and interest—not including taxes and fees. That would equal about $49,763 in total interest over the life of the loan. The average interest rate on the 30-year fixed-rate jumbo mortgage refinance (a loan above the federal conforming loan limit of $806,500 in most places) dropped week-over-week to 7.23%. Last week, the average rate was 7.61%. Borrowers with a 30-year fixed-rate jumbo mortgage refinance with today's interest rate will pay $681 per month in principal and interest per $100,000 borrowed. A 15-year, fixed-rate jumbo mortgage refinance has an average interest rate of 6.38%, up 1.59% from last week. At today's rate, a borrower would pay $864 per month in principal and interest per $100,000 borrowed for a 15-year, fixed-rate jumbo refi. Over the life of the loan, that borrower would pay around $55,831 in total interest. Mortgage lenders charge different interest rates for purchase and refinance loans. Current refinance rates are typically 0.01% to 0.15% higher for a 30-year fixed rate versus a purchase loan. You can reduce your interest rate by paying your closing costs up front instead of rolling them into the loan with a no-closing-cost refinance loan. Buying discount points and avoiding mortgage insurance can also help. When considering a mortgage refinance, compare your current interest rate, mortgage balance and loan term with the new interest rate and term. This comparison helps you estimate your new monthly payment and savings, making it easier to determine if refinancing is the right choice. You may want to refinance your home when you can lower your interest rate, reduce monthly payments or pay off your mortgage sooner. You may want to use a cash-out finance to access your home's equity or take out a new loan to eliminate private mortgage insurance (PMI). Refinancing your mortgage can make sense if you plan to remain in your home for a number of years. There is, after all, a cost to refinancing that will take some time to recoup. You'll need to know the loan's closing costs to calculate the break-even point where your savings from a lower interest rate exceed your closing costs. You can calculate this by dividing your closing costs by the monthly savings from your new payment. Our mortgage refinance calculator could help you determine if refinancing is right for you. Refinancing a mortgage isn't that different than taking out a mortgage in the first place, and it's always smart to have a strategy for finding the lowest rate possible. Here are some suggested approaches to get the best rate: Having a strong credit score is one of the best things you can do to get approved and get a lower rate. You're also likely to look better to mortgage refinance lenders if you don't have too much debt relative to your income. You should keep a regular watch on mortgage rates, which fluctuate often. Also see if you can manage a mortgage payment for a shorter loan term since they usually have lower interest rates. Since the final quarter of 2024, national average mortgage rates have remained in the middle-to-high 6% range, and experts expect this trend to continue through the first half of 2025. If inflation slows and unemployment levels hold steady or rise, the Federal Reserve may reduce the federal funds rate, potentially leading to lower mortgage rates in the second half of the year. However, if inflation stays high and unemployment decreases, rates are likely to remain stable. Since mortgage rates are expected to change little in the first half of the year, those looking to refinance at a lower rate should consider waiting until later in the year. In the meantime, improving your credit score and paying down your loan balance will help you secure the lowest possible rate when you're ready to explore refinancing options. You can usually refinance a mortgage in as quickly as 45 to 60 days, but it depends on many factors – like the type of home loan you choose. Always check with your lender before committing to borrow. Most lenders allow you to refinance a mortgage six months after you start paying it off, although some require that you wait 12 months. Contact your lender to be sure. Closing costs for a refinance can be anywhere from 2% to 6% of the cost of the loan. It's always a good idea to ask the lender what kind of closing costs they'll charge before you decide to borrow from them.
Forbes
a day ago
- Business
- Forbes
Mortgage Refinance Rates Today: June 5, 2025
The rate on a 30-year fixed refinance declined to 6.88% today, according to the Mortgage Research Center. Rates averaged 5.76% for a 15-year financed mortgage and 6.69% for a 20-year financed mortgage. Related: Compare Current Refinance Rates Currently, the average rate for a 30-year, fixed-rate mortgage refinance is 6.88%, down 1.36% from this time last week. Borrowers with a 30-year, fixed-rate mortgage of $100,000 will pay $658 per month for principal and interest at the current interest rate, according to the Forbes Advisor mortgage calculator, not including taxes and fees. Over the life of the loan, the borrower will pay total interest costs of about $137,385. Another way of looking at loan costs is the annual percentage rate, or APR. For a 30-year, fixed-rate mortgage, the APR is 6.91%, lower than last week's 7.01%. The APR is essentially the all-in cost of the home loan. For a 20-year fixed refinance mortgage, the average interest rate is currently 6.69%, compared to 6.87% last week. The APR, or annual percentage rate, on a 20-year fixed mortgage is 6.73%. It was 6.91% last week. At today's interest rate, a 20-year, fixed-rate mortgage refinance of $100,000 would cost $757 per month in principal and interest – not including taxes and fees. That would equal about $82,131 in total interest over the life of the loan. For a 15-year fixed refinance mortgage, the average interest rate is currently 5.76%. The same time last week, the 15-year fixed-rate mortgage stood at 5.91%. The APR, or annual percentage rate, on a 15-year fixed mortgage is 5.81%. Last week, it was 5.95%. Based on the current interest rate, a 15-year, fixed-rate mortgage refinance of $100,000 would cost $831 per month in principal and interest—not including taxes and fees. That would equal about $50,033 in total interest over the life of the loan. The average interest rate for a 30-year, fixed-rate jumbo mortgage refinance (a loan above the federal conforming loan limit of $806,500 in most places) decreased week-over-week to 7.26%, versus 7.62% last week. At today's interest rate on a 30-year, fixed-rate jumbo mortgage refinance, a borrower would pay $683 per month in principal and interest on a $100,000 loan. A 15-year, fixed-rate jumbo mortgage refinance is 6.39% on average, up 0.68% from last week. At today's interest rate, a borrower with a 15-year, fixed-rate jumbo refinance would pay $865 per month in principal and interest per $100,000 borrowed. Over the life of the loan, that borrower would pay around $55,950 in total interest. No, mortgage refinance rates are typically higher than purchase loan rates due to additional risk for the lender. Cash-out refinance rates are also higher than a standard rate-and-term refinance as you are increasing your loan balance by tapping your equity. The application process for refinancing a mortgage is similar to getting a home purchase loan regarding the required paperwork and home appraisal. Additionally, similar closing costs from 2% to 6% of the loan amount apply, which is an extra expense. When you refinance, your new rate is based on current refinance rates and your loan term. This rate replaces your existing mortgage repayment terms. When considering a mortgage refinance, compare your current interest rate, mortgage balance and loan term with the new interest rate and term. This comparison helps you estimate your new monthly payment and savings, making it easier to determine if refinancing is the right choice. There are a number of reasons why you should refinance your home, but many homeowners consider refinancing when they can lower their interest rate, reduce their monthly payments or pay off their home loan sooner. Refinancing also may help you access your home's equity or eliminate private mortgage insurance (PMI). Refinancing your mortgage can make sense if you plan to remain in your home for a number of years. There is, after all, a cost to refinancing that will take some time to recoup. You'll need to know the loan's closing costs to calculate the break-even point where your savings from a lower interest rate exceed your closing costs. You can calculate this by dividing your closing costs by the monthly savings from your new payment. Our mortgage refinance calculator could help you determine if refinancing is right for you. Refinancing a mortgage isn't that different than taking out a mortgage in the first place, and it's always smart to have a strategy for finding the lowest rate possible. Here are some suggested approaches to get the best rate: Having a strong credit score is one of the best things you can do to get approved and get a lower rate. You're also likely to look better to mortgage refinance lenders if you don't have too much debt relative to your income. You should keep a regular watch on mortgage rates, which fluctuate often. Also see if you can manage a mortgage payment for a shorter loan term since they usually have lower interest rates. National average mortgage interest rates will have the most significant impact on refinancing trends throughout 2025, whether they rise or fall. While predicting mortgage interest rates is challenging, experts expect them to remain in the middle-to-high 6% range during the first half of 2025, similar to the final quarter of 2024. However, rates could potentially decrease by the end of the year. If inflation slows and national unemployment levels remain steady or increase, the Federal Reserve might cut the federal funds rate, leading to lower mortgage rates. On the other hand, if the opposite happens, average rates will likely see little movement. Since experts anticipate minimal movement in average mortgage rates during the first half of the year, those looking to refinance at a lower rate may want to wait until later in the year to secure the best rate. In the meantime, improving your credit score, making on-time payments and paying down your loan amount will put you in the best position to secure a low rate when you begin shopping for a refinance offer. Closing costs for a refinance can be anywhere from 2% to 6% of the cost of the loan. It's always a good idea to ask the lender what kind of closing costs they'll charge before you decide to borrow from them. You should always shop around when you're trying to get a new mortgage or refinance an existing one. Take a look at the best mortgage refinance lenders as a starting point and try applying online. Always find out the closing costs each lender will charge, and make sure you're able to communicate well with the lender you want to choose. In a bumpy housing market, you'll probably be in touch with the lender more often than you realize. You can usually refinance a mortgage in as quickly as 45 to 60 days, but it depends on many factors – like the type of home loan you choose. Always check with your lender before committing to borrow.
Forbes
2 days ago
- Business
- Forbes
Today's Mortgage Refinance Rates: June 4, 2025
The rate on a 30-year fixed refinance fell to 6.91% today, according to the Mortgage Research Center. For 15-year fixed refinance mortgages, the average rate is 5.81%, and for 20-year mortgages, the average is 6.76%. Related: Compare Current Refinance Rates The current 30-year, fixed-rate mortgage refinance average rate stands at 6.91%, compared to 6.95% last week. The annual percentage rate (APR) on a 30-year, fixed-rate mortgage is 6.94%, lower than last week's 6.98%. The APR is the all-in cost of a home loan—the interest rate including any fees or extra costs. At the current interest rate, borrowers with a 30-year, fixed-rate mortgage of $100,000 will pay $659 per month for principal and interest, according to the Forbes Advisor mortgage calculator. That doesn't include taxes and fees. Over the life of the loan, the borrower will pay total interest costs of about $137,964. The 20-year fixed mortgage refinance average rate stands at 6.76%, versus 6.81% last week. The APR, or annual percentage rate, on a 20-year fixed mortgage is 6.8%. It was 6.85% last week. At the current interest rate, a 20-year, fixed-rate mortgage refinance of $100,000 would cost $761 per month in principal and interest. That doesn't include taxes and fees. That borrower would pay roughly $83,187 in total interest over the life of the loan. The 15-year fixed mortgage refinance is currently averaging about 5.81%, compared to 5.88% last week. The APR, or annual percentage rate, on a 15-year fixed mortgage stands at 5.85%. At the current interest rate, a borrower using a 15-year, fixed-rate mortgage refinance of $100,000 would pay $834 per month in principal and interest. That doesn't include taxes and fees. That borrower would pay roughly $50,478 in total interest over the 15-year life of the loan. The average interest rate on the 30-year fixed-rate jumbo mortgage refinance (a loan above the federal conforming loan limit of $806,500 in most places) declined week-over-week to 7.33%. A week ago, the average rate was 7.63%. Borrowers with a 30-year fixed-rate jumbo mortgage refinance with today's interest rate will pay $688 per month in principal and interest per $100,000 borrowed. A 15-year, fixed-rate jumbo mortgage refinance has an average interest rate of 6.33%, down 0.28% from last week. At today's rate, a borrower would pay $862 per month in principal and interest per $100,000 borrowed for a 15-year, fixed-rate jumbo refi. Over the life of the loan, that borrower would pay around $55,378 in total interest. Refinance rates are different from mortgage rates and tend to be slightly higher. The rate difference can vary by program and is something to consider as you compare the best mortgage refinance lenders. In addition to having different refinance rates for conventional, FHA, VA and jumbo applications, cash-out refinance rates are higher as you're borrowing from your available equity. Rates for government-backed loan programs such as FHA and VA mortgage refinances can be lower than a conventional or jumbo refinance, as there is less risk for lenders. Still, you should compare your estimated loan's annual percentage rate (APR), which includes all additional fees and determines the interest charges. When considering a mortgage refinance, compare your current interest rate, mortgage balance and loan term with the new interest rate and term. This comparison helps you estimate your new monthly payment and savings, making it easier to determine if refinancing is the right choice. Refinancing your mortgage can be a wise move for many reasons, most notably lowering your interest rate or your monthly payments. It can also help you pay down your mortgage sooner, access your home's equity or get rid of private mortgage insurance (PMI). But there are closing costs associated with refinancing, so it probably makes more sense to refinance if you know you'll be keeping your home for some time. You can determine the 'break-even point' for a potential refinance, or how long it will take for savings from a new mortgage to surpass any closing costs. Find out what those costs will be and divide them by the monthly savings you'll realize with the new mortgage. The Forbes Advisor mortgage refinance calculator can help you run the numbers to see if it's a good time for you to refinance. Much like when you shopped for a mortgage when purchasing your home, when you refinance here's how you can find the lowest refinance rate: A solid credit score isn't a guarantee that you'll get your refinance approved or score the lowest rate, but it could make your path easier. Mortgage refinance lenders are also more likely to approve you if you don't have excessive monthly debt. You also should keep an eye on mortgage rates for various loan terms. They fluctuate frequently, and loans that need to be paid off sooner tend to charge lower interest rates. Since the final quarter of 2024, national average mortgage rates have remained in the middle-to-high 6% range, and experts expect this trend to continue through the first half of 2025. If inflation slows and unemployment levels hold steady or rise, the Federal Reserve may reduce the federal funds rate, potentially leading to lower mortgage rates in the second half of the year. However, if inflation stays high and unemployment decreases, rates are likely to remain stable. Since mortgage rates are expected to change little in the first half of the year, those looking to refinance at a lower rate should consider waiting until later in the year. In the meantime, improving your credit score and paying down your loan balance will help you secure the lowest possible rate when you're ready to explore refinancing options. You can usually refinance a mortgage in as quickly as 45 to 60 days, but it depends on many factors – like the type of home loan you choose. Always check with your lender before committing to borrow. Our guide to the best mortgage refinance lenders is a good starting point, but make sure you compare multiple lenders and get more than one quote. It's always a good idea to find out the closing costs lenders charge, and also to make sure you can communicate easily with your lender. Conditions in the housing market change frequently, so being able to depend on your lender is crucial. Closing costs for a refinance can be anywhere from 2% to 6% of the cost of the loan. It's always a good idea to ask the lender what kind of closing costs they'll charge before you decide to borrow from them.
CNET
3 days ago
- Business
- CNET
Compare 15-Year Mortgage Rates for June 2025
Most prospective homebuyers go for the standard 30-year fixed mortgage, but if you want to pay off your home faster and save money on interest costs, a 15-year mortgage might be a better fit. With a 15-year loan, you'll typically get a lower interest rate and build up your home equity quicker than you would with a longer-term loan. The catch is that your monthly payments will be much higher since you're paying off the loan in half the time. Before you commit, carefully review your budget to make sure you can comfortably handle the higher monthly costs. We'll walk you through how 15-year mortgages work and what rates are doing now so you can decide if the long-term savings outweigh the short-term cost. Current 15-year mortgage rate trends Mortgage rates sharply climbed in early 2022 when the Federal Reserve began raising interest rates to fight inflation. The central bank shifted course and started lowering rates late in 2024, but mortgage rates have remained elevated, and interest rate cuts have been on hold throughout 2025. So far this year, 30-year fixed rates have generally stayed between 6.5% and 7%, while 15-year mortgages have fluctuated between 5.75% and 6.5%. If the Fed cuts borrowing rates again this year, we might see a slight easing-off of 15-year mortgage rates, perhaps moving closer to 5%. However, it's impossible to say where rates will land because they're influenced by a host of economic factors, including the Fed's policies, inflation and labor data, the bond market and investor sentiment. Product Interest rate 30-year fixed-rate 30-year fixed-rate FHA 30-year fixed-rate VA 30-year fixed-rate jumbo 20-year fixed-rate 15-year fixed-rate 15-year fixed-rate jumbo 5/1 ARM 5/1 ARM jumbo 7/1 ARM 7/1 ARM jumbo 10/1 ARM 30-year fixed-rate refinance 30-year fixed-rate FHA refinance 30-year fixed-rate VA refinance 30-year fixed-rate jumbo refinance 20-year fixed-rate refinance 15-year fixed-rate refinance 15-year fixed-rate jumbo refinance 5/1 ARM refinance 5/1 ARM jumbo refinance 7/1 ARM refinance 7/1 ARM jumbo refinance 10/1 ARM refinance Updated on June 02, 2025. We use information collected by Bankrate to track daily mortgage rate trends. The above table summarizes the average rates offered by lenders across the country. What is a 15-year fixed mortgage? A 15-year fixed mortgage is a loan you use to buy a house that you'll pay off over 15 years with a set interest rate. Because it has a shorter term than a mortgage loan with a 30-year term, the monthly payments are higher than with a fixed 30-year loan. 15-year mortgage vs. 30-year mortgage The main difference between a 15-year mortgage and a 30-year mortgage is that a 15-year mortgage will ultimately cost you less since you'll have a lower interest rate and pay considerably less in interest over the lifetime of the loan. But paying off the loan in a shorter amount of time means your monthly payments can be almost double what they are for a 30-year loan. The pros of a 15-year fixed mortgage Shorter loan term: A 15-year fixed mortgage takes half the length of time to pay off compared with a 30-year mortgage. You'll have higher monthly payments, but you'll pay this home loan off twice as fast, resulting in less interest over time. A 15-year fixed mortgage takes half the length of time to pay off compared with a 30-year mortgage. You'll have higher monthly payments, but you'll pay this home loan off twice as fast, resulting in less interest over time. Lower interest rates : Usually, 15-year fixed mortgages have lower interest rates than 30-year fixed mortgages. This is partly because you're paying back your lender sooner than with a longer-term loan, which means less risk for your lender. : Usually, 15-year fixed mortgages have lower interest rates than 30-year fixed mortgages. This is partly because you're paying back your lender sooner than with a longer-term loan, which means less risk for your lender. Build equity in your home much faster: A 15-year fixed mortgage allows you to build more equity in your home faster than with a longer-term mortgage. This means you can enjoy some of the advantages of homeownership, such as refinancing your home loan or tapping into your home equity for financing options. The cons of a 15-year fixed mortgage Higher monthly payments: One downside to a 15-year mortgage is that you're stuck with high monthly payments for the duration of the home loan. If you make a 20% down payment on a $500,000 mortgage at a 7% interest rate with a 15-year fixed mortgage, your monthly payment will be about $3,994, compared to $3,060 with a 30-year fixed mortgage. One downside to a 15-year mortgage is that you're stuck with high monthly payments for the duration of the home loan. If you make a 20% down payment on a $500,000 mortgage at a 7% interest rate with a 15-year fixed mortgage, your monthly payment will be about $3,994, compared to $3,060 with a 30-year fixed mortgage. The maximum mortgage amount you can borrow is smaller: Because you're making high payments every month, lenders could offer you a smaller mortgage amount than they might with a 30-year loan. This reduces the risk to the lender that you will default on the loan. Because you're making high payments every month, lenders could offer you a smaller mortgage amount than they might with a 30-year loan. This reduces the risk to the lender that you will default on the loan. Less financial flexibility overall: If you commit to a 15-year mortgage with a high monthly payment, it could limit your ability to afford other expenses. It means you may have less money to contribute to investment or retirement accounts, or a smaller financial cushion to fall back on if you run into difficulties. Is it worth refinancing to a 15-year mortgage? The main reasons people choose to refinance their home loans are to lower their interest rate or adjust the length of their loan term. Given today's high mortgage rates, you may not be able to secure a lower interest rate, but shortening your loan term can still help you save money. For instance, if you refinance your 30-year mortgage to a 15-year mortgage, you'll end up with higher monthly payments but save on interest and build equity faster in the long run. Before refinancing, consider your financial goals, how much you have left to pay on your mortgage and how long you plan to stay in one place. If you're almost done paying off your primary mortgage or plan to move in the next few years, refinancing to a 15-year mortgage may not offer much financial benefit. If you like the idea of paying off your mortgage sooner, but you're worried about committing to higher monthly payments, there's an alternative. If you stick with a 30-year mortgage, see if you can make additional payments throughout the year, which will help shorten your loan term. This allows you to effectively pay off your 30-year mortgage sooner without locking yourself into the higher monthly payments that are attached to a 15-year mortgage. Alternatives to a 15-year mortgage 30-year mortgage: If you're unable to afford the higher monthly payments with a 15-year mortgage, a 30-year mortgage is a good option. While you'll pay more in interest overall, the lower monthly payments can make purchasing a home more affordable. If you're unable to afford the higher monthly payments with a 15-year mortgage, a 30-year mortgage is a good option. While you'll pay more in interest overall, the lower monthly payments can make purchasing a home more affordable. 10-year mortgage: If you can afford the higher monthly payments that come with a 10-year mortgage, you'll save yourself five years of interest payments. However, you'll likely require a higher income and credit score to qualify. If you can afford the higher monthly payments that come with a 10-year mortgage, you'll save yourself five years of interest payments. However, you'll likely require a higher income and credit score to qualify. Government-backed loan: If a 15-year mortgage doesn't work for your particular financial situation, you can also look into a government-backed loan like an FHA loan, VA loan or USDA loan, which will typically have much lower credit score requirements and often allow you to make a small down payment or no down payment at all. FAQs You can use CNET's mortgage calculator to help determine how much you can afford for a house and work out how to manage financially. The tool takes into account your monthly income, expenses and debt payments. In addition to those factors, your mortgage rate will depend on your credit score and the zip code where you are looking to buy a house.
