If you want to make your mortgage easier to handle, you can refinance. There are two ways to do this: you can either cut your monthly payment while extending the length of your mortgage, or you can shorten the length of your mortgage while keeping your monthly payment about the same.
You may have noticed that the rate on your adjustable home loan is at an all-time low. Refinancing is something that more and more people are doing to cut down on their mortgage costs. But there may still be some risk with refinancing. Because of this, some people think it's smarter to shorten the time they have to pay off their mortgage instead of just lowering their monthly payments.
Refinancing your home is a good choice for people who want to get a better handle on their money. It is a great way to get a better rate on your home loan, lower your monthly payments, or cut the length of your mortgage. Refinancing is popular because it gives people a chance to lower their home loan rates and get better monthly payment deals at the same time. When refinancing, you can choose to cut down the length of your mortgage, but not as many people do this.
Refinancing to Lower Payments Each Month
Refinancing to lower monthly payments is a clear benefit that doesn't need to be explained. When you refinance, you can lower your interest rate and, as a result, pay less. Who wouldn't want a deal like this? You can pay off other bills with the money you save, or you can put it toward your principal. Of course, you shouldn't give in to the temptation to spend more money just because you have some left over.
Cut down the length of your mortgage
Through refinancing, you may be able to cut down the length of your mortgage while keeping your monthly payment the same. For example, you can refinance to get a lower interest rate on your home loan and then cut the length of your mortgage from 20 years to 15 years while keeping the same monthly payment. Since you still have to pay the same amount, it might be harder to see how this helps you out financially. But if you look at it in a bigger picture and over a longer period of time, you can see how this might be a better deal for you.
This is one way to look at it. Imagine that the rate on a 30-year mortgage for a home loan is 5%. Most likely, this will cost you almost twice as much as the money you borrowed. On the other hand, if you have a 10-year mortgage with a rate of 5%, you will only have to pay about 30% more of your principal as interest. With a 20 percent difference between these two and the fact that you get out of debt faster, it's easy to see how this choice can lead to much better deals.
Obviously, if you still think it's easier and more practical to lower your home loan rate by making smaller monthly payments, then go ahead and do that. But if you don't need the extra savings that refinancing can give you, you might be better off shortening the length of your mortgage. In the end, the choice will come down to your situation and how much money you want to make.
