We all know that fixed mortgage rates are the conservative choice. Generally, you can opt to pay off your home loan in a time frame of 15 years or 30 years. Accelerating your mortgage payoff from a 30 year to a 15 year time frame dramatically increases your payment amount, and may make this option unattainable for the most homeowners. Stretching your payments over a 30 year time frame instead of 15 years will lower the payment amount, but extends the time frame out into your sixties, seventies or even eighties. Who wants to be an octogenarian with a mortgage payment?
I’d like you to know there are other fixed rate time frames available that offer a compromise – a low rate close to the 15 year fixed rate as well as a low payment like that of a 30 year rate. Consider refinancing your home for a 20 or 25 year time span … hopefully paying off the biggest investment of your life near your anticipated retirement age.
Consider the following scenario:
Your home is worth $1,000,000.
Your outstanding loan amount is $600,000.
Your current rate is 5%, with a payment of $3,742, and 26 years left on your loan.
If you were to refinance with a 15yr fixed, your rate would go down to 3.875% and your time frame would be reduced by 11 years, but your payment would go up to $5,112.
If you were to refinance with a 30yr fixed, your rate would go down to 4.625%, your payment would go down to 3,584, but your loan would be extended 4 years.
Consider that selecting a 20 or 25 year time frame may meet all of your financial objectives:
· Lowering your rate
· Lowering your payment
· Reducing your time frame.
15yr Fixed | 20yr Fixed | 25yr Fixed | 30yr Fixed | |
Rate | 3.875% | 4.250% | 4.500% | 4.625% |
Payment | $5,112 | $4,316 | $3,874 | $3,584 |
Closing Costs | $3,500 | $3,500 | $3,500 | $3,500 |
Call me if you want to discuss your particular scenario.
Tracy Trudeau
858-216-4385
tracy@tracytrudeau.com
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