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Build Your Equity Faster By Refinancing

Shortening the length of a home mortgage loan is every home owners dream. This is usually done by refinancing their mortgage. However, even if the rate that is offered is low, and the payment period is shortened; the monthly payments would be higher. The benefit of this solution is the best feeling there is for any home owner out there. A good example is briefly explained below.

Lets take a well off family for this situation. They make a decent sum of money annually. Lets say they make a purchase for a new home. They had an ARM at a rate of 8% for a fixed period of 30 years. Now they replace this with a fixed rate home mortgage loan at 7% for a period of 15 years. This resulted in a spike in their monthly payment bill, it increased by $190, however, they will finish their mortgage payments much faster. The other benefit is the amount of interest paid on the mortgage. For the 15 year term, the interest will total about $100,000, while on the ARM term, it will total around $220,000. Just look at this difference, and see how much this family can save in the long run. This way, this family can take out equity from their home.

Some families can\’t afford the high spike in mortgage payments, so they might not be able to decrease their loan period by 15 years. If you are in a situation like this, the best solution is to ask your financial advisor or mortgage broker to help you customize a deal for you. If you are not able to drop down to a 15 year mortgage, try getting a 20 year, or 25 year term mortgage. They will all help you out in paying off the mortgage quicker and by reducing your time period.

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