Ready to refinance your mortgage?
Even if you are happy with the terms of your mortgage and your monthly payment, refinancing can still be hugely beneficial, either by shortening your loan duration, lowering your monthly payments, or doing both at the same time.
Take Advantage Of Changes In The Market
The housing market is almost constantly in flux, and changes in interest rates are notoriously hard to predict. The same mortgage rate that seemed attractively low one year can look unreasonably high the next. This depends entirely on the health of the market. Every time the current mortgage rate drops, you have an opportunity to save money by paying less interest. Even small changes can add up considerably over the lifetime of a loan.
Shorten the Duration of Your Loan
Of course, refinancing out to 30 years isn’t only one option, and, while it might considerably lower your monthly payments, it might not be what saves you the most money overall. For example, if you have good credit and a stable financial situation, refinancing out to a shorter term, like 10 or 15 years, can lower your interest and shorten the overall duration of the loan. This can save you a considerable amount of additional money in the years after your loan is paid off.
Use Lower Payments to Pay Off Your Loan Sooner
If you do decide to refinance out to 30 years to give yourself lower monthly payments, you can still shorten the duration of your loan by continuing to make the same payments you were before. Say, with refinancing, you get your monthly payment lowered from $2,500 to $2,000. If you continue to pay $2,500 every month – something that is already in your budget – then you shorten the life of your loan by paying it off more quickly. This allows you to reap the benefits of both lower interest and a shorter loan – saving money on two fronts.