In the article I share what I learned about Changing the term of your mortgage: increase or decrease. There are plenty of reasons that you may want to consider refinancing your mortgage, one is to change the term of your mortgage. There can be some significant advantages to changing the term of your mortgage, there can also be some disadvantages, particularly if you are extending your mortgage. It is therefore important to understand the reasons that you may want to make a change the length of your mortgage.
Probably the best reason to change the term of your mortgage is to get it paid off faster. Unfortunately this is not something that a lot of people do. The main reason is that they often don’t recognize just how much they can benefit from it. If you change from a thirty year mortgage to a fifteen year mortgage the amount that you would save in interest would be in the tens of thousands of dollars, possibly even the hundreds of thousands. Clearly this should give you plenty of incentive to refinance your mortgage.
The obvious objection that people have to reducing the length of their mortgage is that it requires that higher monthly payments be made. This is not the issue that a lot of people think that it is. The actual difference in monthly payments between a fifteen year mortgage and a thirty year mortgage is surprisingly small.
This is mainly because of the impact of interest. Since you pay so much less interest on a fifteen year mortgage the amount of interest that you pay each month is substantially reduced. This results in payments that are lower than you would expect. Since most people find that over time their incomes rise it should be possible to afford the new payments if you refinance to a shorter mortgage.
Far more common than refinancing for a shorter mortgage is refinancing to extend your mortgage. The obvious reason that people do this is so that they can reduce their monthly payments. This may be a good option if you have having a hard time making your monthly payments but you have to realize that it will cost you thousands of dollars in interest over the long term. It is therefore important to make sure that you really consider all of your options and make sure that it is necessary before you take this step.
One thing that you have to keep in mind when you are refinancing your mortgage, either to extend it or shorten it is that you will have to pay the fees that are involved. These fees can really add up so you need to make sure that it is still worth it. The most important thing is to make sure that the amount that you save, either in total interest or in monthly payments is enough to offset these fees.