If you want to refinance your existing 30-year, fixed-rate mortgage, your first thought is probably to refinance into another 30-year home loan.

But with interest rates so low, you should also take a look at refinancing into a 15-year, fixed-rate mortgage. Here are the major differences between the two options.

When you refinance into a 30-year mortgage, you’re basically starting over.

If you aren’t that far into your mortgage, you’ve mostly been paying interest.

True, you are starting over with a somewhat smaller principal balance (as long as you aren’t doing a cash-out refinance), but you’re back to having 30 years of mortgage payments ahead of you.

Despite this drawback, you could save in the long run if your new interest rate is significantly lower than your old one, especially if you keep your mortgage for a long time.

But there might be a better option.

Depending on how many years you have left on your mortgage, refinancing into a 15-year loan could give you a jump on paying off your mortgage sooner.

Don’t automatically assume you can’t afford the payments on a 15-year mortgage without doing the math, because the interest rate on a 15-year mortgage will be lower than the rate on a 30-year mortgage.

If a 30-year fixed costs 3.85%, a 15-year fixed might charge 3.15%.

Compare the best mortgage rates in your area in our extensive database.

If you’ve paid down your principal significantly, if current interest rates are substantially lower than your old interest rate, if your income has increased or if your non-mortgage debt has decreased, you might be able to afford the monthly payments on a 15-year mortgage.

Use our How Much Are My Payments? Calculator to see how your monthly payments change with different interest rates and terms.

In addition to owning your home free and clear sooner, you’ll pay dramatically less money for your house with a 15-year mortgage.

Not only will your interest rate be lower, you’ll be paying interest for fewer years, which means you’ll pay far less overall in interest.

How much less?

Use our Simple Amortization Calculator to find out using the numbers specific to your situation.

Here’s an example: If you financed $100,000 for 30 years at 3.85%, your interest payments would total $68,771. If you financed $100,000 for 15 years at 3.15%, your interest payments would total $25,607.

What could you do with an extra $43,164?

Despite the massive savings, even if you can afford the 15-year mortgage, you might choose the 30-year mortgage if you want a safety net.

The lower monthly payments will give you breathing room when money is tight.

When money is flowing freely, you can make extra payments toward the principal to pay off your mortgage in less than 30 years. You might end up paying it off in 22 years instead of 15, but you’ll still be saving a lot.

Whatever option you choose, make sure to calculate your break-even period — the number of years you’ll have to keep your new loan before the savings from your lower interest rate match your closing costs from refinancing — before undertaking any refinance.

Our Mortgage Refinancing Calculator can help you with that decision.

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