Turning A 30-Year Fixed Rate Into A 15-Year Rate!

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Turning A 30-Year Fixed Rate Mortgage Into A 15-Year!
How can a borrower turn a long-term mortgage into a short-term one?
We’ve got the answer!

Some experts say that the BEST way to do this is to refinance your existing mortgage. Many home buyers are using numerous programs, such as the FHA Streamline Refinancing, VA Streamline Refinance, and HARP, to refinance their long-term mortgage into a shorter term mortgage.

Some other options are a borrower can pay more each month and get the same result without refinancing the loan.

Since the goal of any borrower is to get rid of debt as soon as possible, below are three other ways to pay off a 30 year fixed rate mortgage twice as fast:


“Prepay” – Switching from a 30 year mortgage to a 15 year mortgage involves compressing the loan repayment to a shorter period. According to experts, this will increase the loan payment by about 45 percent. As many homeowners do not want to commit to paying a higher amount every month, they skip the refinance programs and choose to “prepay” their mortgages instead. If the mortgage payment is $1,600 per month, for example, but the borrower sends $2,300, he will be able to pay off his mortgage in 15 years, while saving more than $100,000 in interest. Our example assumes a $250,000 mortgage and a 4.5 percent interest rate.


Bi-Weekly Payments – Opting for bi-weekly payments is a great idea to reduce the term of a mortgage even more. Based on the aforementioned example, if a homeowner chooses to pay $1,150 every two weeks, he will reduce the payoff timeline by about 1.5 years. Besides paying the mortgage faster, the borrower will save more than $10,000 in interest. Some banks offer bi-weekly payment plans for free, while others charge a fee.


Extra mortgage payment – Making an extra mortgage payment every year can help a homeowner shorten the term of his mortgage as effectively as a bi-weekly payment plan. For instance, a borrower could use his year-end bonus to make a 13th mortgage payment.
Therefore, if a homeowner can afford to pay around $700 a month – it could be more or less, depending on the total mortgage amount and interest rate – he can cut many years off his mortgage. To find out exactly how much he needs to pay each month to turn a 30 year fixed rate mortgage into a 15 year mortgage, he can always use a loan calculator.
Another point worth mentioning is that the amount paid extra should be applied to the principal balance, as this will lower the monthly amount that goes toward the interest. Also, it is advisable for the borrower to read the contract to ensure that he will not have to pay prepayment penalties.


For more information or discuss this further, please contact for more information.

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