Move Past an Adjustable-Rate Mortgage: Refinance Your Home with a 15-Year Fixed Loan

Published March 30, 2022

If you’re considering refinancing your adjustable-rate home loan into a 15-year fixed rate, there’s a lot you can stand to gain. First-time homebuyers, as well as borrowers who plan to move after a few years, see adjustable-rate mortgages as a helpful financial tool. But what happens when the fixed-rate period ends, and you have to content with higher interest payments? If you’re in the verge of transitioning into the adjusted rate period of your ARM, refinancing may be a good option. 

In this article, we’ll provide a quick refresher on common loan terms, then take a closer look at refinancing an adjustable-rate mortgage into a fixed-rate options. If you want to refinance your home from an adjustable-rate mortgage into a 15-year fixed term, we’re here to help. 

Loan term basics

Fixed-rate and variable-rate mortgages are the two most common types of home loans in the market. In a fixed-rate mortgage the interest rate remains the same for the duration of the loan – regardless of changes in the market. By contrast, a variable-rate loan fluctuates throughout the term until the mortgage is paid off. 

What is an ARM?

Among the most desirable types of variable-rate mortgages is the adjustable-rate mortgage (ARM). In an adjustable-rate mortgage, the interest rate remains fixed for the first few years of the term, then resets and changes for the remaining period. First-time homebuyers and those who don’t plan to live in their house for long find this mortgage especially desirable; it allows homeowners to pay a lower fixed rate for the first five, ten, or fifteen years before the underlying terms change into a variable rate. The adjustable-rate mortgage is often the preferred choice for homeowners who seek low initial rates. This provides some financial flexibility in the first few years of homeownership.The confusion arises after the fixed rate ends. At that time, the variable rate is adjusted according to the underlying contract and market rates. In certain circumstances, homeowners may need to pay up to twice the rate they're accustomed to paying. Interest rates can fluctuate dramatically, so it’s impossible to know what rates you’ll contend with after your ARM’s initial fixed period. 

If you’re at the end of the fixed period of your adjustable-rate mortgage, you might be considering a refinance. Opting to refinance a home loan into 15-year fixed terms can help you lock in a long-term low interest rate while remaining on your home payoff timeline. 

Related: Fixed Rate vs ARM Loans

Reasons to refinance into a 15-year fixed-rate mortgageUnlike an adjustable-rate mortgage, a 15-year fixed mortgage ensures the interest rate remains low throughout the term of the loan. Established homeowners prefer these types of loans because they guarantee a fixed monthly payment throughout the 15-year period. In securing this type of mortgage, you have the ability to save tens of thousands of dollars in interest over the life of the loan, and you’ll accumulate equity faster than you might with a 30-year option. The biggest downside? Higher monthly payments, which can be a financial stretch for some homeowners.

Moving from your adjustable-rate mortgage to refinance a home loan into 15-year fixed terms

Refinancing is an excellent way to save money and adjust mortgage payments to better suit your financial goals. If you’re 10 or 15 years into an adjustable-rate mortgage, you might find a 15-year refinance especially attractive. You’ve already put a decade into paying off your loan, and refinancing into this shorter term will help keep you on track to pay off your home in 25 or 30 years. Choosing to refinance a home loan into 15-year fixed terms will also help you to remain at a low interest rate. If you’re a few years into your adjustable-rate mortgage, you’re likely contending with the fact that interest payments are about to rise. Refinancing into a 15-year mortgage will help secure a low rate while keeping monthly payments stable. You should expect these monthly payments to be slightly more expensive, but you’ll save thousands of dollars while contributing a greater percentage of your payment to accumulating home equity. 

The benefits and disadvantages when you refinance home loan 15-year fixed rate

Let’s recap: If you’re nearing the adjustable-rate period of your ARM, refinancing into a 15-year fixed-rate mortgage might be a good option. In doing this, you can: 

• Continue paying a low interest rate. In many cases, your interest rate will actually decrease.

• Remain on the same or similar payoff timeline.

• Lock in a fixed payment for the remainder of your loan. 

• Quickly accumulate equity in your home.

However, this type of refinance is not perfect for every homeowner. In refinancing to a shorter loan term, you should also expect to take on higher monthly payments. This alone may prevent some borrowers from considering a 15-year fixed-rate refinance. If you’re unsure whether this financial move is right for you, get in touch. Give us a call at (800) 910-4055 or complete an online application. We can help you choose a refinancing option that accommodates your financial needs and goals. If you’re in the very early stages of your refinancing research, use our mortgage calculator to understand how you might benefit. 

How to refinance a home loan to a 15-year fixed rate

If you’re curious about how this type of refinance can help you meet financial goals, let us know. We’ll run through your options and help determine which type of refinance, if any, is best for your future. Move past your adjustable-rate mortgage and refinance your home into a 15-year fixed loan.