How to Make a 30-Year Mortgage a 15-Year

You can convert your mortgage to 15 years.

You can convert your mortgage to 15 years.

Thirty years is a long commitment, especially in a relationship that will cost you thousands of dollars in interest. A mortgage is usually necessary to purchase a house and, unfortunately, many young homeowners can't afford to pay it in less than 30 years. However, if your financial situation improves, it is to your benefit to pay off the mortgage in less time. If you don't want to be stuck with a mortgage for 30 years and can afford the higher payments and closing costs, you can refinance to make your mortgage a 15-year term.

Contact lenders to determine rates and approval criteria. This will help you calculate a payment and begin to gather the necessary information to proceed.

Calculate your mortgage payment on a 15-year repayment schedule. There are a number of online calculators you can use to determine the payment. Verify that you can afford the payment before proceeding.

Fill out an application with the new lender. Indicate the principal amount you will be paying off and select 15 years as your term.

Provide any supporting documentation requested by the bank. Typical requirements are two years of W-2 forms and federal tax returns, one month of pay stubs and three months of bank statements.

Sign disclosures and authorizations provided to you. These include the Truth-in-Lending Disclosure (the terms of your request), a Good Faith Estimate (estimate of closing costs), Privacy Disclosure (your right to qualify) and an authorization to run your credit report. The bank uses your credit report and financial information to calculate your debt-to-income ratio, which tells it whether you can afford the loan.

Read your commitment letter carefully upon approval. This will detail the terms of your new loan and the requirements to close.

Contact the lender to set up a closing date. This is the date on which you will sign the loan documents and your new loan will take effect.

Contact your existing lender to obtain a payoff figure good through the date of closing. This figure is the total amount needed to satisfy the loan including principal, interest and administrative charges. Ask for a per diem, the amount of interest payable for each day the loan is active. This will allow you to move forward in the event of a delay without obtaining a new payoff letter. You will simply add the per diem.

Attend the closing and sign the loan documents. Once everything is in order, the new lender will submit payment to the existing bank to pay off the loan. After closing, you will begin repayment on the new 15-year schedule.


About the Author

Carl Carabelli has been writing in various capacities for more than 15 years. He has utilized his creative writing skills to enhance his other ventures such as financial analysis, copywriting and contributing various articles and opinion pieces. Carabelli earned a bachelor's degree in communications from Seton Hall and has worked in banking, notably commercial lending, since 2001.

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