Refinance Your Mortgage for Rate and Payment
By Rich Bersani, Vice President of FrontGate Mortgage, NMLS #133243
Sewell, NJ – One of the biggest reasons homeowners refinance their mortgage is to obtain a lower interest rate and lower monthly payments. By refinancing, the borrower pays off their existing mortgage and replaces it with a new one.
Refinancing typically occurs when mortgage interest rates drop significantly, but borrowers with recently improved credit scores (from paying off credit card debt, making mortgage payments on time, etc.) are often candidates for better interest rates as well.
The question most asked is, “But why should I go back into a 30-year loan?”
One option is to take the route of the “same payment” refinance, and actually pay off the loan faster and save money on interest fees in the long-run. If refinancing results in a lower monthly payment, you can still continue making the same payment you made in the original loan, and the extra money will be applied to the principal balance.
For example: Let’s say you have 25 years remaining in your current loan, and you refinance back to a 30-year loan with a slightly lower interest rate, resulting in a payment reduction of $200 per month. (Note: This is just an example. The actual amount could vary.) You could then take that extra $200 per month and apply it toward the principal on the new loan. At this rate, the loan will be paid off in 22 years and 4 months, which is 2 years and 8 months less than the original loan.
On the other hand, if are looking to take equity out of your home to invest, you may invest the extra money in a side-fund that could earn a better rate of return and grow to the amount of the mortgage (and beyond) in even less time. This method provides excellent liquidity, but having more direct access to this money may be too tempting for some homeowners.
Regardless of the reason for the refinance, call me today to find out if refinancing could benefit you.
Rich Bersani, Vice President of FrontGate Mortgage Company (NMLS 133243) a division of American Neighborhood Mortgage Acceptance Company licensed by the New Jersey Department of Bank and Insurance (#NO00004875).