As a result of refinancing, your total finance charges may be higher over the life of the loan.

Accelerate Your Payoff

Life has a way of creeping up on you. At first, money is tight, and your monthly housing expenses are your primary concern. Your current 30 year fixed rate mortgage got you into your home; hard work kept you in it. Then time goes on…better job, higher salary, less expenses. The thought of owning your home outright creeps into your head. It’s a dream which doesn’t have to take 30 years to accomplish given the right circumstances, and loan program from Nations Lending. Many of our borrowers have arrived at the same conclusion that cutting duration on their mortgage is not only attractive, but it’s doable, and refinancing into a 15 or 10 year mortgage is the instrument of choice for these people.

 

For those Nations Lending clients wanting to get ahead on their mortgage, there are some financing avenues that can be explored. Refinancing your home loan to pay off your mortgage early can be done by shortening the term of your loan. This will result in larger monthly payments, but a shorter repayment period. Decreasing the loan term will likely result in savings on interest charges as interest rates are often lower for shorter-term loans and you will pay less interest over the life of the loan.

 

By paying down your mortgage obligation more quickly, you may be able to focus on other financial opportunities such as investments, saving for retirement or putting money towards a child’s college education. Buying down the principal on your mortgage can also translate into gaining equity on your house more quickly. Shortening the term of your mortgage has its benefits, but make sure you consider the costs associated with a refinance, how long you plan to stay in the home and if you will be able to afford a larger monthly mortgage payment. If refinancing is not a viable option, you may want to consider sending additional principal payments along with your regular payments or paying your mortgage in shorter intervals.

 

Let’s look at a quick example. Although a borrower’s mortgage payment, moving from a 30 year fixed-rate mortgage (FRM) into a 15 year FRM, will be higher, the total interest paid over the life of the loan is significantly less as well. A borrower paying off a $250k mortgage @ 4.25% on a 30 year fixed will pay close to $193,000 in interest. Compare that to a borrower financing the same amount, at the same interest rate, but in a 15 year mortgage. This person will pay approximately $89,000 in total interest.