In the first six months of 2010, about one-fourth of the homeowners who refinanced their home loans shortened the length of their loan. The Wall Street Journal says a higher percentage of borrowers chose that path this year compared to last year:
The interest rate for 15-year loans is astonishingly low — about 3.86 percent on average, according to a survey of rates taken last week. A 15-year loan usually contains a lower rate than a 20- or 30-year loan. The Journal explains the math behind how the lower rate will affect your monthly payments:
“For example, with a 4.5% interest rate on a 30-year fixed-rate mortgage of $200,000, you would have a monthly payment of $1,015, including principal and interest, Amy Crews Cutts, deputy chief economist for Freddie Mac says. The monthly payment jumps to about $1,480 with a 4% interest rate on a 15-year fixed-rate loan.
“Of course, if the refinancing borrower’s current 30-year loan has a higher rate, the difference between the monthly payments could be lower. Still, you should count on some increase in monthly payments.”
