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Mortgage Refinance Reduce Term

Reduce the Term with Mortgage Refinance

Generally, all home owners go for a conventional fixed rate 30-year mortgage, especially those who purchase their first one. If you are one of this vast majority, you too must have opted for the longest payout schedule possible, in order to take advantage of lower monthly payments. However, if you are in the process of buying a home, you need to look at the other option of shorter loans, because they can represent huge savings over the life of a mortgage.

Let us get down to the brass tacks. The fact of the matter is that bulk of the money you spend for your monthly mortgage payment is dedicated to paying interest. A house that sells for $200,000 today may wind up costing more than twice that price, once all the interest payments are calculated during the course of three decades. If you decide to shorten the life of the loan, you can dramatically increase your savings, often by hundreds of thousands of dollars. No wonder, more and more people are going for this option. All you need to do is a bit of the math and it becomes clear as daylight that by refinancing and shortening the term and reducing interest payments you can make dramatic mortgage loan savings

You need to organize your finances before you take on the commitment of your own home and a 30-year period of loan repayment. Again, if you go in for mortgage refinance and change your mortgage loan’s term, you can organize your financial plans.

For instance, if you’re 50 years old and plan to retire at the age of 65, you should think of paying off your mortgage in 15 years so that you have no liability when you stop working. It is both financially and personally rewarding to have all loans out of the way when retirement arrives.

If you are a younger parent with children, you will be planning for their college education in 10 to 15 years. In that case, too, you would want to do a home refinancing to shorten the term and pay off the mortgage before the tuition bills begin to arrive in the mail.

This is the best way to avoid making payments of tuition and mortgage at the same time. It can otherwise be terribly difficult to combine the two. If you explore all the possibilities of mortgage refinance, you can even save enough to offset the cost of your child’s education by not paying an extra 15 years of mortgage interest. This is the time to take advantage of this double-barreled bargain, because the interest rates are near their all-time lows. However, there are loud signs that they will reach double digits within the next few years.

 

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