The Benefits Of 15-Year Refinancing
Learn how refinancing a home mortgage could lower your interest rate and save you thousands.
Refinancing is when you take out a new loan to completely pay off your original one. This may sound odd, but it gives you the opportunity to get a better interest rate and change the loan period, which could save you thousands of dollars over the course of your loan.
Why would I want to refinance?
Sometimes people choose to refinance their home mortgage because they qualify for a better interest rate than when they first purchased the home. If you had bad credit, you didn’t have a large down payment, or the market rates were high when your original mortgage was issued, refinancing could end up saving you thousands of dollars in interest and shorten your amortization period.
How you can save money
Take for example someone who originally got a 30-year fixed home loan for $150,000 at 6 percent: over the life of that loan, they will pay about $174,000 in interest (yes, you read that correctly!). Imagine that person had a balance of roughly $139,000 after making loan payments for 5 years, and had paid about $42,000 in interest so far.
If that same person chose to refinance to a 15-year fixed loan at 6 percent, they could save a significant amount of money in interest, compared to their original loan. Without refinancing, they would pay $174,000 in interest over the course of their loan. With a 15-year refinancing, they would end up paying about $114,000 in total interest over the course of their loan – that’a a savings of $60,000 in interest fees! An independent mortgage broker like The Mortgage Source can help you find the best refinancing solution for your individual situation.
While refinancing can save you money and be a great financial decision, it’s important that you avoid predatory refinancing offers – make sure you read the fine print! One of the best ways to avoid an unfair refinancing loan is to shop around, or have a licensed mortgage broker shop around for you to find the best offers available. Shopping around means you get several quotes and rate estimates, which allows you to pick the best offer for you. You should never accept the first offer extended to you, without first shopping around for the best terms.
Another way to avoid the burden of a predatory refinance loan is to always read the fine print of any loan offer. Never sign a loan contract without reading every word of fine print to make sure you’re getting the loan you agreed to. If the language is confusing or hard to understand, it’s a good idea to have a trusted financial advisor or attorney review the paperwork.