How to Turn Your 30-Year Fixed-Rate Mortgage Into a 15-Year Fixed-Rate Mortgage Without Refinancing

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Reduce the term of your mortgage with voluntary extra payments.
Reduce the term of your mortgage with voluntary extra payments. (Image: Thinkstock/Comstock/Getty Images)

The only true way to turn a 30-year fixed-rate mortgage into a 15-year fixed-rate mortgage is to refinance. However, you can make a 15-year mortgage payment on your 30-year mortgage payment each month to get the same result without the need for refinancing. With the cost of refinancing ranging between 3 and 6 percent of the loan’s total value, the added cost sometimes outweighs the benefit. Additionally, by keeping the lower monthly payment associated with a 30-year mortgage, you can still pay the lower monthly payment in months when you need the extra cash.

Review your monthly statement to find your current 30-year mortgage payment. Be sure to note how much of the payment is going toward your escrow account, as opposed to going toward principal and interest. To determine your new monthly payment, you only need the dollar amount going toward principal and interest. The escrow account funds are separate from this calculation.

Note that the monthly payment for a 15-year mortgage versus a 30-year mortgage is typically 40 percent more each month. Multiply your current 30-year principal and interest portion of your mortgage payment by 1.4 to determine your new monthly principal and interest payment. To get the full payment you must pay the lender, you must add back in your monthly escrow amounts from your 30-year mortgage.

Mark your payment as going toward principal and interest, as opposed to future payments, when making your payment either by check or online. Additional payments will not reduce the principal owed unless marked in this manner.

Tips & Warnings

  • Making one extra monthly payment of just principal and interest, not including escrow, per year knocks about seven years off the life of a mortgage. Additionally, making two extra monthly payments, minus escrow, per year reduces the term by 14 years. An alternative method to making the higher monthly payment each month is to save up two full monthly payments per year and make them in one lump sum. This is an alternative that is especially useful for those working on commissions or who receive a bonus once a year.
  • You cannot pull money already paid into your mortgage back out of it again without refinancing. Do not dedicate more money towards debt repayment than you can afford. If overpaying each month on your mortgage makes it hard to meet other financial requirements, take a step back and analyze your budget to be sure that you can afford those extra payments.

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