Mortgage rates have plunged this year, driving down the long-term costs of homeownership. Regardless of loan type -- either FHA, USDA, conforming or jumbo --mortgage payments are downright cheap as compared to just six months ago.
REALTORS® will tell you it's a great time to buy a home. That may be true.
It's an even better time to refinance one.
Exceptionally low mortgage rates make for exceptionally low mortgage payments and, no matter for how long you've owned your home or made payments on it, you have a chance to dramatically slash your payments, leaving money for other things such as retirement, home improvement, and college tuition.
Here's why : When you make your mortgage payment each month, a portion of your payment is interest. The lower your interest rate, the less interest you pay each month. This math applies to all amortizing loans -- 30-year schedule, 15-year schedule or otherwise.
Over the life of a loan, the interest cost savings can be substantial.
As a real-life example of two 30-year fixed rate mortgages for $300,000 -- one from April 2011 and one from today :
April 2011 : The $300,000 mortgage requires $275,000 in interest paid over time
November 2011 : The $300,000 mortgage requires $217,000 in interest paid over time
In other words, at today's rates, with a $300,000 mortgage, you can chop $57,000 off your long-term mortgage interest costs as compared to a mortgage from just 6 months ago.
That's a 21% savings and the math applies to all loan sizes.
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The Reverse Of "Starting Over" With Your Mortgage
There's a common refrain among homeowners facing refinance scenarios. It goes like this: "These low rates are excellent," they say, "but I'm already 6 years into my loan and I don't want to start over. I don't want a new 30-year fixed rate loan."
Maybe you've even thought something similar; something akin to refinancing to a 15-year fixed or some other shorter-length loan.
The good news is that you don't have to.
There's a simpler way to refinance without "starting over". It requires just a small amount of advance planning, but yields a lifetime of real-cash savings. Here's what to do:
Make note of your current principal + interest payment
Refinance to a new, lower mortgage rate and payment; reset your loan for a new 30 year
Make your former principal + interest payment to your new lender each month
Continue making payments until the loan is paid off
In other words, refinance your mortgage but continue to make your "old" payment to your new lender. This will add extra principal to your payment each month, thereby accelerating your home loan payoff.
So long as you don't add egregious costs to your loan balance at the time of closing -- in every example imaginable -- you will own your home faster than if you never refinanced at all.
Click here for a rate quote. I can show you how the numbers work for your home loan.
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Because of today's low mortgage rates, the cost of paying off a mortgage has never been lower. You can save on interest costs and put that money to other use.
So, if you own a home -- no matter when you last financed it -- see what you can save with a refinance. You have nothing to lose by asking, and everything to gain. Especially now that you know how to refinance without taking on 30 more years of borrowing.
About the Author
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan atdan.green@waterstonemortgage.comor call 513-443-2020.
And, if you are searching for a home, please keep in mind that with today's interest rates, every $1,000 in taxes equates to approximately $9,000 in house price. So, if you are using a Top Agent, you should keep in mind that you might be able to afford even MORE house for the buck, if you confirm that a home has less than the usual amount of taxes relative to its asking price!
Mark Slade
Keller Williams
917.797.5059
www.goodhomesforgoodpeople.com
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