for Home Owners
Rates dropped and you figure a refinance of your
old mortgage can save hundreds of dollars in mortgage payments each
year, maybe thousands. The mortgage broker has prepared the papers
with the lowest house payment she could get for you, and wow, was it
low. What a no brainer!
You have to do this mortgage refinance, right? Probably,
but think about one quick idea first. You took a 30-year mortgage
ten years ago. By doing a 30-year refinance now you reduce your payments
but now your house won’t be paid off for another 30 years. What
if you refinance again in ten more years? Now it will be fifty years
from when you bought the house until it is paid off. It doesn’t
take too many mortgage refinances like this until you may never pay
off the mortgage before you die. Even if you pay it off, even reducing
the rate each time, a $250,000 mortgage could cost you an extra $250,000
Think of this as an alternative. When rates warrant
a mortgage refinance, take an amortization on the new mortgage to stick
to the 30-year payoff. For example if you are 10 years into a 30-year
mortgage take a 20-year mortgage amortization. If you refinance 20 years
into the process take a 10-year mortgage amortization. You may even get
a lower rate by taking a shorter amortization. Twenty-year mortgages
run about one quarter to one half a percent less than 30-year mortgage
refinance interest rates. In the short run you will pay more each month,
but in the long run the shorter mortgage amortization savings may amaze
you. Plus you have the pride of owning your home without a mortgage.
I prepared a chart to show what happens. Using the
$250,000 mortgage we talked about above refinancing while keeping to
a 30 pay off can save almost $90,000. On the other hand the total money
paid after 4 refinances exceeds that figure by almost $290,000. Look
at the table; you may insert your own numbers on the interactive page.
Do the math, save yourself money and own your house without a mortgage
sooner. Try our calculator now to view the differences.