Paying off your mortgage Faster
If you can afford it, refinancing so that you can pay off your mortgage faster is a great idea. Many people use their homes as retirement vehicle but only if the loan is setup the right way. There are a few ways to accomplish this. Here are some ideas on how refinancing could help you pay off your mortgage faster.
Refinance to a lower rate
Homeowners can save money by refinancing to a lower rate, or by converting an adjustable rate mortgage into a fixed rate which remains locked for the life of the loan. If you would make higher payments if forced to, but would otherwise struggle to make the higher payments then it may make sense to opt for a 15-year mortgage rather than a 30-year loan. The shorter duration loan will typically have a lower interest rate & since the loan will be paid off faster you’ll spend far less on interest. For your convenience, here are current rates in your local area.
If you bought your home with a low-down payment and are stuck with PMI, refinancing into a loan without PMI will help you pay off your home faster. Let’s say that you have a mortgage payment of $2,000 and there’s a $200 PMI payment included in that payment. If you were to refinance your home to remove that PMI payment and have a new payment of $1,800, you just saved yourself a ton of money and are now able to use the savings to make higher monthly principal payments. $200 per month may not seem astronomical however let’s do some simple math. $200 per month is $2,400 per year. Over a 30-year period, that’s about $72,000 in interest you would save. Doing this loan would pay off your home quicker.
If you took out a 30-year loan many moons ago and have not refinanced for quite some time, chances are you have a higher interest rate. Depending on how many years you have left to go, you could refinance into a short-term loan such as 10-year or 15-year loan with a very low interest rate. 10 and 15 tear loans have extremely low interest rates so consider it and see if this is possible for you.
Automated Bi-Weekly Payments
You should check with your current loan servicer if automated bi-weekly payments can be made. If you they won’t do this for you, you can refinance and set up an automatic bi-weekly payment. What is a bi-weekly payment? So traditionally, you make a mortgage payment monthly or you make 12 payments per year. On a bi-weekly payment refinance, your payments would be made every 2 weeks therefore you end up making 13 payments per year not 12. This is additional payment per year will expedite the payoff of your mortgage.
If one of these options sound like a fit for you, please call us or apply today. We will be more than happy to go over all your options to see what would benefit you most.