If you are a homeowner, your home is likely one of your biggest investments and your mortgage, one of your largest monthly expenses. If you happen to stay in your home until your mortgage is paid off, the total amount you’ll pay over the life of the loan – including principal and interest – will be considerably more than the original loan amount.
Let’s just say that you borrowed $150,000 on a 30 year mortgage at 4.75%. If you pay off your mortgage over those 30 years, you’ll end up paying just under $132,000 in interest. The opportunity to lower your interest rate and/or reduce the term of your mortgage can have a significant impact on your total interest expense. For example, take the same $150,000 for 30 years at 3.75%. Not only would you save about $88 on your monthly payment, you’d save about $31,500 in interest over the life of the loan.
Let’s continue with our example and consider a 15 year mortgage for $150,000 at 3.75%. Though your monthly payment would increase, you not only would pay off your mortgage in half the time, but you’d save more than $85,000 in interest as compared to the 30 year mortgage at 4.75%.
Use our handy loan calculator to calculate your own scenarios.
Because there are costs associated with refinancing you’ll need to factor this in when you evaluate the potential savings of a refinance. If you’ve been in your home for a number of years, you may actually be able to reduce the term on your mortgage with minimal impact to your monthly payment, but with a major impact on total interest paid. Finally, depending on the amount you refinance and the value of your home, you may get the added benefit of eliminating PMI (Private Mortgage Insurance) if you are currently required to have this insurance on your mortgage. You can refer to your escrow statement for your PMI amount.
With mortgage rates at historical lows, it just makes sense to talk to a Cornerstone loan officer to see if you can benefit from refinancing your current mortgage. Just call 615-385-6898 for email for more information.Tags: mortgages, refinancing a mortgage