How this works
The math compares two amortization schedules, your current loan continued to its natural end vs. the new 15-year, and adds in closing costs. The savings come from two sources:
- Less time accruing interest. 15 years instead of 26+ means fewer total months of interest charges. This is usually the bigger lever.
- Lower rate. 15-year rates are typically 0.5-0.75% below 30-year rates. Smaller lever but compounds.
The affordability check uses two industry-standard ratios:
- Front-end ratio: mortgage payment ÷ gross monthly income. Lender max ~28%, comfort threshold under 25%.
- Back-end ratio (DTI): (mortgage + all other debt) ÷ gross monthly income. Lender max ~36-43%, comfort threshold under 36%.
The deciding question: can you afford the higher payment without raiding your emergency fund or pausing retirement contributions? If yes, the refi is usually an easy yes. If no, paying extra on the 30-year captures most of the benefit without locking you in.
The verdict logic
- ✅ Refinance: meaningful interest savings, new payment under 28% front-end and 36% DTI back-end, closing-cost break-even under 36 months.
- ⚠️ Pay extra on the 30 instead: the new payment is affordable but tight, OR the rate spread is too narrow to justify closing costs. Capture the savings via extra payments without locking in the higher minimum.
- ❌ Don't refinance: new payment exceeds 28% of gross, OR DTI over 43%, OR break-even is so far out that life uncertainty kills the bet.
FAQ
How much can I save going from 30 to 15?
Typically a third to half of the original loan amount in interest. On a $400,000 loan that's $150,000-$250,000 in lifetime savings. The exact figure depends on your rates and how many years into the 30 you are.
What's the catch?
Your monthly payment jumps, often 25-50% higher. The cash going toward the loan can't go anywhere else. Make sure you can comfortably absorb the higher payment AND maintain emergency savings AND retirement contributions.
Should I just pay extra on my 30-year instead?
Almost as good. You'd capture most of the interest savings while keeping the flexibility of the lower required payment. The downsides: you don't lock in the lower 15-year rate, and you have to be disciplined enough to make the extra payments every month. The 15-year locks the discipline in for you.
What if 15-year rates aren't much lower than 30-year?
If 15-year rates are within 0.25% of 30-year rates, the refi math gets weaker. Most of the savings come from less time accruing interest, but the rate spread still matters. Below 0.25% spread, paying extra on the 30 may be a smarter move.
What's a safe payment-to-income ratio?
Lender max is usually 28% of gross income for housing alone, or 36-43% including other debt. For comfort, target under 25% front-end. The 15-year jump can push you past that line. Calculator flags this.
Are there closing costs to worry about?
Yes, typically 2-5% of the loan amount. Break-even on closing costs is closing costs ÷ monthly payment savings. For 30-to-15 refis, "monthly savings" is negative (you're paying MORE per month), so break-even is calculated via total interest savings instead.