30 years is a long time to be in debt (as is 20 years if you opted for a 20-year loan term), and let’s face it. Your home loan is likely to be the biggest debt you’re dealing with right now. 

So while refinancing to a shorter-term loan might increase your payment, it might be the best financial decision you’ve ever made. 

Here are four reasons to consider a shorter loan term.

#1) You’ll pay off your mortgage faster.

Paying off your mortgage faster is an obvious benefit, but it’s one well worth considering. Refinancing to a 15-year loan will have a much bigger impact than making one extra payment per year on a 15-year mortgage, or paying a little extra every month.

The sooner you’re free and clear on your home, the sooner you’ll get to experience the true joys of home ownership, with all the security and safety they can provide. 

See also: How to Refinance Your Mortgage, Step by Step

#2) You’ll build equity faster.

Equity is powerful. Equity gives you more freedom to sell your home and upgrade to a new one if you need or want to. Equity may give you access to a home equity line of credit if you need to make repairs or renovations. 

When you build equity, you build wealth. It’s one of the strongest ways to secure your family’s future, especially as home values go up over time.

See also: Long vs. Short-Term Mortgages: Which is Right for You?

#4) You may reduce your interest rates.

Normally, the lower the term, the lower risk to the lender, the lower rate you can get. Reducing interest rates may mean that your payment will be lower than you are probably fearing (see below). 

It also means you’ll reduce the overall cost of the loan. A $300,000 mortgage could end up costing you nearly $700,000 over the life of the loan, whereas a 15-year $300,000 may only cost around $450,000, depending on interest rates.

Why would you want to pay an extra $200,000 if you don’t have to?

See also: The Ultimate Guide to Mortgage Interest Rates: What You Need to Know

#4) The payment won’t go up as much as you might expect.

If you transform a 30-year mortgage into a 15-year mortgage you might expect your payment to double. In reality, you may only have to pay a few hundred dollars more each month. If you can afford the monthly payment, the refinance is likely to be a great move.

One reason is that you’re refinancing on the total outstanding loan amount, which is typically lower than the purchase price of your home because the typical homeowner has been paying on the longer-term mortgage for several years before seeking to refinance.

Those lowered interest rates make a big difference to your overall home payment as well. 

See also: How to Understand Your Mortgage Payment Structure

Get Help Refinancing Today

Alex Doce can help you work the math on your own current home loan and mortgage, can help you estimate the difference in your interest rates, and can help you determine whether refinancing to a shorter term mortgage makes sense at this time.

Get the guidance you need to make a sound financial decision. Schedule a one-on-one consultation with Alex Doce today.