| Choosing to refinance your existing mortgage or home | | | | mortgage and you agreed to a 30-year period and a |
| loan can be a wise and profitable decision, as you will | | | | fixed interest rate of 9%. It has already been 18 years, |
| likely be able to take advantage of lower interest rates | | | | so now you have only 12 years of payments left. |
| from a different bank or lending institution. | | | | Now if you were to refinance this, you could get a |
| It is possible to save hundreds or even thousands of | | | | new loan with a 5-year term, and even if you had an |
| dollars every month, but the trick is knowing what you | | | | 11% interest rate with this new loan, you will still pay |
| need to do in order to have everything structured in | | | | back less total interest. This is important to realize as it |
| the best possible manner to minimize your total cost. | | | | will save you more money in the long run, and if you |
| If you are reading this, there is a good chance that you | | | | are a person that only looks at the interest rates then |
| already have a mortgage, and you know that the size | | | | you might not see the potential benefit of a refinancing |
| of your monthly payments depends upon the total | | | | situation such as this. |
| value of the mortgage as well as the interest rate to | | | | The point here is that even though the surface interest |
| which you and the bank agreed. | | | | rate may be higher with a refinanced loan (regardless |
| If you have a fixed rate mortgage, it will be easier for | | | | of whether it is fixed or adjustable), you may still be |
| you to figure out whether refinancing your home loan | | | | paying back LESS total interest over the term of the |
| will be a good option for you. If you have an adjustable | | | | loan. |
| rate mortgage, the calculation may vary but you should | | | | What your goal should be in terms of your home loan |
| still be able to get a good idea of where your current | | | | or mortgage is to minimize the amount of total interest |
| interest rate is and what direction it will be headed in | | | | that you will pay back to the bank, while making sure |
| the next few years. | | | | that the interest rate and time-period you have chosen |
| Most people pay attention to only the interest rate | | | | will make your monthly payments as comfortable as |
| when looking to refinance their mortgage, but this can | | | | possible. |
| be a misleading methodology for a few reasons: | | | | You would not want to over-extend yourself financially |
| First, more important than just the interest rate is the | | | | by creating monthly payments that are too large, but |
| TOTAL amount of interest that will eventually be paid | | | | at the same time remember that the smaller the |
| back. | | | | payments are (and the longer the time you pay them) |
| To illustrate this point, let's say that you got a $500,000 | | | | the greater the total amount of interest repaid will be. |