Saving Money When You Refinance Mortgage Loans
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by: marciafreeman
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When you refinance mortgage loans, you spend hours on paperwork and meetings, and spend thousands of dollars on refinancing fees. So when you refinance mortgage loans, how do you soften the blow to your wallet?
* A better interest rate. Your interest rate is what makes a mortgage expensive; a bad interest rate can cost you more than the loans principal. For instance, if you take out a $100,000 mortgage with a 30 year term at a 7% interest rate, you will pay $139,511 in interest. Thats 139% of the capital. Lowering the interest rate to 5% drops the total interest payments to $93,256, a savings of $46,255. That far outweighs a couple of thousand dollars in refinancing fees.
* A longer loan term. A longer term will raise the total amount you spend, but lower your monthly bills, an important consideration when you are strapped for cash. A $100,000 mortgage with a 7% interest rate and a 15 year term will cost $899 a month, but extending the term to 30 years drops the payments to $665.
* Shortening the loan term. If the total sum you pay concerns you more than the amount you pay every month, you can save cash by shortening the term of your mortgage. If your mortgage is $100,000 and your interest rate is 7%, halving the term from 30 years to 15 drops the full cost of the loan from $239,509 to $161,789.
* A different type of mortgage. Moving to a fixed rate mortgage from an adjustable rate mortgage can lock in a much better interest rate when you refinance mortgage loans. This is particularly true in situations like that of July 2009, with low interest rates beginning a long climb back to their previous heights. On the other hand, switching from a fixed rate loan to an adjustable rate loan can allow you to enjoy falling interest rates when a drop is on the horizon. You may also want to switch to a balloon loan or another type of non amortizing loan to dramatically drop your monthly payments and get through a temporary financial crisis.
If you plan to refinance mortgage loans, youve made a major decision. As with any kind of refinance, mortgage loan refinancing is a time consuming process that will take a bite out of your bank account at the outset. However, if your current mortgage locks you into a high interest rate, high monthly payments, or a high total payment, deciding to refinance mortgages can be an excellent decision. Related Home mortgage --
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