The Long and Short of It
When it comes to paying down a mortgage, it’s a matter of balancing personal goals with the basic math.
As you do the math, consider the factors that go into your monthly payment:
- Principal: This is the amount you pay for your home and the part of the payment that you are seeking to pay down if you shorten your repayment period.
- Interest rate: This is the percentage of your loan amount charged to borrow the money for your mortgage. This rate can sometimes be adjusted through a refinance. Typically, the interest rate is lower for a shorter-term mortgage, and reducing the repayment period can result in less total interest paid because you’re borrowing the money, and paying interest on it, for a shorter period of time.
- Discount points: Points, which each equal 1% of your mortgage amount, can be purchased to lower your rate; this option may make sense if you’re planning to stay in your home for an extended period of time.
- Private mortgage insurance (PMI): If your original down payment on your property was less than 20%, there’s a good possibility you’re paying PMI. If you have a strong history of timely monthly payments and enough equity built up in your property, refinancing may give you the opportunity to lower or eliminate the amount of any PMI payment
Know Your Options
Figuring out which refinancing option works for you can be a challenge. Contact our experienced loan consultants at (800) 210-8849 to find out which options you may qualify for and how to make them work to your advantage.