Refinancing your mortgage loan can save money and make your budget more manageable. There are disadvantages and risks associated with refinancing your mortgage; the main disadvantage is that you are back to square one with your loan amortization. This means your payment will primarily go to interest and you will build very little equity in your home. There is a way around this; you can keep your original pay off date and reduce your finance charges.
Choose a Short Term Length
Mortgages come with a variety of term lengths ranging from ten to thirty, even forty and fifty years. By choosing a short term length you can match the payoff date of your original mortgage loan somewhat closely. By choosing a mortgage with a shorter term length you will qualify for a lower interest rate and will build equity in your home at a significantly faster rate. This will reduce the amount of finance charges you pay to the lender.
Pay Additional Principal Each Month
If choosing a shorter term length doesn’t work for you, paying extra each month towards the principle loan balance will shorten the duration of your loan and reduce your finance charges. Many people do this by making bi-weekly mortgage payments; to do this you simply divide your monthly mortgage payment by two and pay that amount every two weeks. This results in making one extra payment to your loan principle every year. Over the course of five or ten years this simple trick results in thousands of dollars in savings.
Choose the Best Mortgage When Refinancing
Of course whether or not you save any money by refinancing depends on the mortgage you choose. Many homeowners simply choose the mortgage with the lowest interest rate and overpay on the lender fees and closing costs, negating any potential savings while being none the wiser. You can learn how to avoid this by registering for a free mortgage guidebook.
To get your free mortgage guidebook visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of Mortgage Refinancing: What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
Claim your free guidebook today at: http://www.refiadvisor.com
