Refinance to a shorter term to save on total interest

If you can afford higher monthly payments, refinancing from a 30-year to a 15-year mortgage dramatically reduces total interest paid. For example, refinancing a $300,000 mortgage from 7% (30-year) to 5.5% (15-year) can save over $200,000 in total interest.

Why It Works

Shorter terms have lower rates and far less interest over the life of the loan. You build equity faster and own your home outright sooner. The trade-off is higher monthly payments.

Tips

• Make sure the higher payment still fits comfortably in your budget with room for emergencies
• Run the numbers on a 20-year term as a middle ground between 15 and 30
• Do not refinance to a shorter term if it leaves you unable to save or invest elsewhere