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How to turn a 30 Year Fixed Mortgage into a 15 Year Fixed

Many buyers are torn when deciding between getting a 15-year or 30-year fixed-rate mortgage. I believe fixed-rate loans are the best choice for residential buyers unless you are only planning to be in the property for a couple of years, then an adjustable-rate or interest-only mortgage might be better.  The 30-year has a lower monthly payment. The 15 year has a lower interest rate. According to Michael Abram of RPM Mortgage: “There is typically at least a 1/2% difference in the mortgage rates between the 15 and 30 (depending on fico score, property type, down payment amounts, etc.). I typically recommend 30 years fixed over 15 years fixed for my first-time home buyers, because they are unfamiliar with the expenses of owning a home in an expensive city like Los Angeles where the median home price  is hovering around 700K.  The lower monthly payment gives them more room if they go through a rough patch or just want to get comfortable making a regular payments to a bank without feeling like they are stretching themselves to a point of being house poor on a monthly basis.

Most buyers choose the 30-year fixed-rate mortgage for the lower monthly payment. If you are feeling comfortable in your financial situation there is nothing that says you can’t pay off your loan early. Unlike commercial loans which often times have prepayment penalties residential loans seldom have prepayment penalties- you might want to check to be sure if you are worried about it but I have never come across it personally.

If you want to pay off your loan early, I recommend going the making extra payments route rather than refinancing because every time you refinance you incur fees and you reset the clock on interest amortization. The only exception to this is if interest rates have gone way down- then the only thing that matters is the lower rate.

Back in the day, it was very complicated to figure out how to turn your 30-year note into a 15-year note. You had to take your pencil and scratch paper and getting really confused. Not the case today with modern online mortgage calculators ! Thank heavens for the internet.

Let’s take a quick look at a 30-year and 15-year comparison. This scenario is a $650,000 purchase price 150K down and a 3.4% interest rate on the 15 yr and 4.1% on the 30 yr.

As you can see, there is almost a $1,000/mo.! difference between the 15 year and 30 year.  Turning your 30 year into a 15 isn’t cheap. In this scenario, it was an extra ~$24,000 each year to make the change. The good news is if you don’t have all of that money, you can pay whatever extra amount you are comfortable with as the extra payments are entirely optional.

The rule of thumb for calculating turning your 30 yr into a 15 is 2.5(x) your current monthly mortgage payment each year as an extra payment.

Want to run your own scenario?  Check out Nerdwallet’s 30-year and 15-year mortgage calculator.

Any extra payment you make goes 100% towards the principal and speeds up your loan repayment timetable. If you fall short of the 2.5 each year or skip a few years, it might turn the 30 year into a 15 year, but each contribution speeds you up each year. 1 monthly extra payment each year turns a 30 year into a 25, and  2 extra payments each year makes it a 23.


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