In 2009, 18.5 percent who refinanced opted for a 15-year loan, nearly three times the 9.4 percent share in 2007.
Similar data from mortgage financier Freddie Mac found that 30 percent of borrowers who originally had 30-year fixed-rate mortgages went with 15-year or 20-year fixed-rate loans, the highest level in six years.
So why the sudden popularity of shorter-term fixed-rate loans?
For example, a $200,000 loan at 4.5 percent on a 30-year fixed would be roughly $1,013, while a 15-year fixed at four percent would carry a payment of $1,479.
But consider the fact that the borrower may have held an interest rate of 6.5 percent on a 30-year fixed prior to the refinance, with a monthly payment of $1,264, and you can see why the larger payment isn’t so significant.
There’s also the mentality that mortgage rates are so low that why not go as low as you can go, by snagging a 15-year fixed instead.
Just note that while a 15-year fixed can save you a ton of money in interest, it comes with greater responsibility, and if times get tough, that larger payment could prove to be your downfall.