All-time record low mortgage rates mean opportunity.
There are three leading refi strategies we use most often.
Let’s take a look at each using an example:
Scenario: You bought a $500,000 home in 2014 and took out a $400,000 30-year fixed-rate mortgage at an interest rate of 4.25%. Your principal and interest payment is $1,907.36 and you’ve been paying steadily ever since you moved in. You now have a loan balance of $353,400 and have 24 years remaining.
Winning refi strategy #1 – Lower your rate and pay off the loan faster.
Proposal 1 below shows an option for a new 20-year fixed rate at 2.75%:
- Payment is $9 more per month.
- You pay off your loan 4 years sooner.
- If you keep your loan/house for the next 24 years, you save $114,053 of mortgage interest vs. keeping your existing loan.
Over 5 years, you save $26,724 of interest and increase your equity by $26,964 at the same time by paying more toward the principal each month.
Winning refi strategy #2 – Lower your rate and pay off the loan over the same number of years remaining on your existing loan, in this example, 24 years.
- Payment is $186 less per month ($2,232 of annual payment savings).
- If you keep your loan/house for the next 24 years, you save $78,004 of mortgage interest vs. keeping your existing loan.
- Over 5 years, you save $21,683 of interest, increase your equity by $10,224 (because more of each payment is going toward principal), and save $11,160 in monthly payments all at the same time.
What’s not to love about this strategy?
Winning refi strategy #3 – Maximum monthly payment savings by lowering your rate and resetting the amortization clock to 30 years.
- Payment is $419 less per month ($5,028 of annual payment savings). (Maybe you can invest these savings and earn more than 2.99% on the investment over time.)
- If you keep your loan/house for the next 30 years, you still save $37,732 of mortgage interest vs. keeping your existing loan.
- Over 5 years, you save $20,604 of interest and save a whopping $25,140 in monthly payments.
The only downside is you won’t pay down your principal as quickly so your balance will be $4,835 higher than keeping your current loan. But you’re building up equity “outside your house” (the payment savings) rather than in between the 2 x 4s.
There’s a winning refi strategy for almost every homeowner at today’s record-low rates. The key is working with your financial advisor to determine which winning strategy is best for your current and future financial situation.
Contact an Accunet home refinance expert today and find a winning refi strategy for your home!
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