![]() ![]() ![]() A 15-year mortgage at the same rate would have a $1,607.76 initial payment, but apply $732.76 to the balance. $229.41 of the initial payments go to the principal (the first month only). Here is an example:Ī $200,000, 30-year mortgage at 5.25 percent carries a monthly payment of $1,104.41. This higher payment means that more money to be applied to your loan balance, letting you pay it off faster. Over time, the principal portion of your payment goes up while the interest portion goes down until you have completely paid off your loan.ġ5-year loans have a higher payment than 30-year loans. After each payment, the balance of the loan goes down, which means in subsequent months you’ll owe less interest. The rest of the payment gets applied to the principal balance. The first part of the monthly payment goes toward interest. (There is also an 8-year fixed rate mortgage, but it can be difficult to find a lender who offers it.)Įvery fixed rate mortgage operates similarly, the interest rate and monthly payment will remain the same over the fixed period of time, in this case, 15 years. The only common fixed-rate term with lower terms than the 15-year is a 10-year. How a 15- year fixed mortgage refinance worksġ5-year mortgages work similarly to any other fixed rate loan with one important difference - they take less time to go away that a traditional 30-year fixed mortgage. Not to mention, current 15-year refinance mortgage rates are at an all-time low, so depending on when you secured your original loan, you should find yourself saving a substantial amount of money over the life of your loan. While doing this might not lower your monthly payment, it will do something even better - get your house paid off more quickly, letting you end up with no payment at all in just 15 years. One of the best ways to take advantage of low interest rates is to refinance your 30-year mortgage to a 15-year mortgage.
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