A 15-year refinance is a home loan for homeowners who want to refinance their property. Refinancing is typically done after the homeowners have some equity in it. Various lenders have different policies about loans depending on the amount or equity a homeowner has. In most cases, this type of loan is sought by homeowners who bought their property when it was at a higher value or when the interest rates were higher.
By refinancing their current loan, some homeowners are able to enjoy the benefit of a lower monthly payment, thanks to a lower interest rate. The reason many people choose a 15-year term is because they have already been paying on their mortgage and don't want to face another 30-year loan. Most 15-year home loans have a fixed rate. Homeowners who have good credit and a solid repayment history can get an excellent deal for a refinance.
The 15-year refinance loan is similar to a regular home loan, but terms and provisions vary from one lender to another. Homeowners are not eligible for the same low rates and good deals offered in a standard first-time home-buyer's loan, but it is possible to get a loan that results in considerably lower monthly payments.
There can be disadvantages to this type of refinancing, though. The first and most common is that many people seek this option after paying on their home for less than 20, 15 or even 10 years. When this is the case, depending on their interest rate and original loan amount, they may wind up paying even more for a refinance divided into 15 years than they would on their 30-year loan.
If monthly payment amounts are the reason for seeking this financing, it is best to consider this important factor first. This is the main reason that most Americans seek a refinance. However, there are some people who simply want to pay off their mortgage faster, have money to spare and want to take advantage of lower interest rates.
As a general rule, when considering whether or not to look into a 15-year refinance, it is best to sit down and make a list of monthly expenses and income. Compare the two and figure out the debt-to-income ratio. Next, figure out what 36% of the monthly income is. If debts and this amount exceed income, a 15-year term is out of the question. However, if it can be accomplished comfortably, a payment of 36% of the monthly income for this refinancing option may be feasible.