Lenders love to push 15-year loans to borrowers who would like to pay off their mortgage early.
One reason for that is the front-end fees that lenders earn by convincing you to refinance your 30-year loan into a 15-year loan.
While it’s a valid concept, you can often accomplish the same result by adding extra principal to your present 30-year loan payments.
Here’s an example.
Let’s assume you have 30-year $200,000 loan @ 4.0% interest rate.
That works out to a $954.83/month principle & interest payment.
If you can afford to increase your payment to $1,100/month, the extra principle you pay each month turns your 30-year loan into a 23.3 year loan.
Increasing your payment to $1,200/month reduces your loan to 20.3 year loan.
Of course, the wild card here is your present interest rate.
If it’s considerably higher than the interest rate available for a new 15-year loan, you’ll probably be better off refinancing into the new 15-year loan.
If you would like my help comparing loans, give me a call at (208)938-5533.
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