How to refinance into a 15-year loan

1. Set a clear financial goal: There should be a solid purpose to the refinancing — whether it’s to reduce your monthly payment, shorten the term of your loan or pull out equity for home repairs or debt repayment. 
2. Check your credit score and history: You’ll need to qualify for a refinance just as you needed to get approval for your original home loan. The higher your credit score, the better refinance rates lenders will offer you — and the better your chances of underwriters approving your loan. While there are ways to refinance your mortgage with bad credit, spend a few months boosting your score, if you can, before you start the process.
3. Determine how much home equity you have: Your home equity is the total value of your home minus what you owe on your mortgage. You may be able to refinance a conventional loan with as little as a 5 percent equity stake, but you’ll get better rates and fewer fees (and won’t have to pay for private mortgage insurance or PMI) if you have at least 20 percent equity. 
4. Shop multiple lenders: Getting quotes from at least three mortgage lenders can save you thousands. Bankrate’s refinance rate table allows you to comparison-shop loans, to help you find the best fit for your financial needs.
5. Get your paperwork in order: Gather recent pay stubs, federal tax returns, bank/brokerage statements and anything else your mortgage lender requests. Your lender will also look at your credit and net worth, so disclose all your assets and liabilities upfront. Having all your documents ready before starting the refinancing process can make it go more smoothly and often more quickly.
6. Prepare for your home appraisal: Mortgage lenders typically require a home appraisal (similar to the one done when you bought your house) to determine its current market value.
7. Come to closing with cash if needed: The closing disclosure, as well as the loan estimate, will list how the extra expense in closing costs to finalize the loan. You may need to pay 3 to 5 percent of your total loan at closing. 
8. Keep tabs on your loan: Store copies of your closing paperwork in a safe location and set up automatic payments to make sure you stay current on your mortgage. 

Why compare 15-year refinance rates today

Mortgage rates have shot up since 2022, and that makes it more important than ever to shop around for the best deal. On the bright side, 15-year mortgage rates are lower than those on 30-year loans — but there’s still variation from lender to lender.

Shopping around for quotes from multiple lenders is key for every mortgage applicant. When you shop, consider not just the interest rate you’re being quoted, but also all the other terms of the loan. Be sure to compare APRs, which include many additional costs of the mortgage not shown in the interest rate. Some institutions may have lower closing costs and fees than others, or your current bank or credit union may extend you a special offer.

Don’t be afraid to walk away from your current lender when you refinance. If you can find a better deal elsewhere, go for it. Consider quotes from both online and traditional brick-and-mortar banks. Or, look into using a mortgage broker, who will be able to provide rates from wholesale lenders.

Pros and cons of a 15-year mortgage refinance

Pros

• Lower mortgage rates: Lenders charge lower interest rates for 15-year loans because they’re taking on risk for a shorter amount of time.
• Less total interest paid: Along with a lower interest rate, compressing the repayment period to 15 years means you’ll wind up paying less in interest overall than you would with a longer-term loan.
• Faster equity growth: With a 15-year loan, it’ll take less time to build equity in your home because more of your initial mortgage payments go towards principal rather than interest.
• Stability: A consistent principal and interest payment can help you better map out your housing expenses for the long term. (Your overall monthly housing expenses can change, however, if your homeowners insurance and property taxes go up or down.) Of course, this is only true if your mortgage has a fixed rate. An adjustable-rate mortgage won’t give you this same benefit for the whole life of the loan.

Cons

• Higher monthly payment: Repaying a mortgage over 15 years means you’ll have higher, less affordable payments compared to 30-year mortgages.
• Buy less house: With higher payments, you might qualify for a smaller loan amount.
• Less financial flexibility: Higher monthly payments can make it harder to budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.

Not sure whether to commit to the higher monthly payments? You can mimic the effect of refinancing to a 15-year loan by simply making extra payments on your existing 30-year loan. You’ll pay less interest and shorten the pay off time while still keeping some wiggle room. Should a financial emergency arise, you can revert to your original, lower payment amount for that month, or as long as you need to, without incurring any penalties.

Deciding between a 15-year refi and increasing payments on your existing loan? You can use our Additional Mortgage Payment Calculator to see how extra payments will shorten your pay-off time and lower your interest costs.

When to consider a 15-year refinance

If you currently have a 30-year mortgage and have room in your budget for a higher monthly mortgage payment, refinancing to a 15-year fixed-rate loan can make good financial sense. You’ll still have the stability of knowing that the monthly payment won’t change, while getting the benefit of a lower interest rate. Plus, you’ll pay off your home faster, freeing up money for other financial goals like saving for retirement when you do. Keep in mind that you need to show the lender that you have enough income to cover a higher payment in order to qualify for the new loan.

On the other hand, if your main goal is to achieve the lowest possible payment, you're better off refinancing to a 20- or 30-year mortgage. While starting fresh with a new long-term loan isn’t the right tactic for everyone, it is an option, especially if you need to trim monthly expenses.

It might be a good time to refinance into a 15-year loan if:

• You’ve gotten a raise: Say you took a 30-year mortgage five years ago, but your income has risen considerably since then. In that case, it could make sense to refinance into a 15-year loan. Your payments will be higher compared to a 30-year loan, but your higher income could allow you to absorb the new cost and pay down your loan in half the time.
• The monthly payments on a 15-year mortgage won’t be much higher than you’re already paying: This can be especially compelling if your credit score has improved significantly, or if you want to refinance out of an FHA mortgage and its steep mortgage insurance premiums.
• You're halfway into a 30-year mortgage: Granted, not many borrowers keep loans this long, but if you’re at the halfway point of your 30-year loan, the time could be right for refinancing to a 15-year one. For one thing, your rate is likely much higher than what you’d pay today. For another, you’ll have a lower principal balance after all those years of repayment.

To compare your monthly payments, check out Bankrate's 30-year vs. 15-year mortgage calculator.