Gain more, quicker equity through refinancing
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Most homeowners consider refinancing because they want to lower their monthly payments by lowering the interest rate they are paying on. But there is another aspect to refinancing that homeowners would be thrilled to know about.
Mortgage analyst, Craig Romero explains how refinancing can help homeowners gain more equity on their home, quicker, in his article, “The Fast Track to Gaining Equity with Refinancing,” located on mortgage-listings.com.
“Your home is probably your biggest asset, and the equity in your home is the key to that asset. If you’re paying off a typical 30-year mortgage, you could be throwing some of that equity, and thousands of dollars, away.”
As a result, more and more people are finding out that refinancing their home will indeed gain them more equity, quicker. Even though mortgage rates have been slightly rising in the past year, they are still within the lowest percentage bracket in history.
Basically, if you refinance at a lower interest rate, but continue to make the same monthly payments you were before refinancing; you will be able to save thousands of dollars in interest, pay off your mortgage early and build equity faster.
To save even more money, when you refinance you should consider taking out a 15-year mortgage.
“A 15-year mortgage can save you thousands of dollars. For example, let’s take a $100,000 mortgage with a 7 percent interest rate. If you were to take out a 30-year mortgage with those terms, your total payments would equal $239,511 and the total interest you paid would equal $139,511.”
“If you took that same exact mortgage amount and interest rate, and took out a 15-year mortgage, your total payments made would equal $161,789 and the total interest you paid would come to $61,789, saving you approximately $77,722.”
Remember, those figures are based on a $100,000 mortgage. Since most mortgages are higher that that, you would save even more money.
When refinancing, most people refinance with a 30-year mortgage again. This will lower your monthly payment but it will actually take you longer to pay off your loan.
“Even if you don’t qualify for a 15-year refinance, you will want to ask the lender to prorate the length of your loan to the amount of time you currently have left to pay off.”
“For instance, if you’ve been paying on your mortgage for 10 years, ask for a 20-year mortgage instead of a 30-year plan. This will ensure that your home is paid off in the quickest amount of time possible and that your equity accrues at an accelerated rate.”
Refinancing will save you lots of money if you do it wisely. Refinancing with a 30-year mortgage will lower your monthly payment. But this may actually cost you more money because you will be paying interest over a longer period of time.
If you refinance and keep your monthly payment the same it was before, you will save thousands of dollars, gain more equity and pay off your loan a lot quicker, especially if you go with a 15-year refinance.
