Build Equity with Shorter Term Loan
With rates on the downswing, refinancing your home mortgage loan could land a superior interest rate. Refinancing with a short-term loan can be accomplished with low equity and a less than perfect credit rating. Monthly payments will be an increased amount, but the rewards include faster payoff and a lower interest rates.
When it comes to mortgage refinancing, it’s all about the interest. The longer you pay on your loan, the more interest you have to pay. Makes sense, right? The average mortgage loan is 30 years. Envision the interest money you would save if you refinanced your loan for 15 years!
Short-term refinancing can be a wise move for individuals with a consistent monthly cash flow. The increased monthly payment amount requires consistent income to meet the terms of the loan. Many short-term refinance loans have the same interest rate as long-term counterparts. Paying the same interest rate for a shorter term saves money over the life of the loan because the payment schedule is much shorter.
If equity is your goal (and it should be), a short term mortgage refinance should be a definite consideration. Your equity will build much more swiftly because you are paying the principal amount of the loan faster – and equity is based on the amount of principal you’ve paid down. Higher payments means that you’re paying more on the principal which means – you guessed it – more equity, more quickly.
Why is equity important? Equity is, in the simplest terms, the value your property has to you personally. When you’ve higher equity, it means for the most part that you’re that much closer to owning the property outright. It means that you have less debt associated with the property and that increases its value for such things as educational expenses or home improvement.
A higher monthly payment might be more difficult but the loan will be paid in half the time. This leaves more funds available for future endeavors associated with vacations and retirement plans.
Refinancing an existing mortgage loan to a shorter-term loan will save money, increase equity, reduce interest rates and increase payment of the loan principal. Equity will be earned swiftly and the burden of having a mortgage loan is reduced over the terms of the loan. Less interest will be paid to finance companies over time. Refinancing is an option that grants you to begin the process of reducing or eliminating debt while building equity.
A short-term mortgage refinance loan might be the right solution to help you build equity and free up cash flow. A mortgage loan specialist or financial advisor can provide information about options available.
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