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How Your Mortgage Refinance Rates Affect Your Payments
Author David Schneider | Dec 03,2007
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When you refinance a mortgage, you are looking to lock in a lower interest rate so that your overall mortgage costs less money. Ideally, this means that your mortgage payments should decrease, unless you have decided to shorten the length of the loan.
Most people that refinance their mortgages know their payments will be lower, but they might not understand how the new rate affects their payments. By discovering how much your payments will change, you will be able to make informed and accurate plans for the future.
How Much Will a Lower Rate Affect Your Payments?
Many variables can determine exactly how much you owe on your mortgage. To keep things easy, we’ll look at the simplest variables. Let’s say that you currently owe $200,000 on a mortgage that has 15 years left, and an interest rate of 6.23 percent. Assuming all of this information is correct, your monthly payment its $1,712.67.
Now, let’s say you are refinancing and locking in a new interest rate of 5.89 percent on a 15-year mortgage. This will make your monthly payments drop to $1,675.85. Depending on your perspective, this may or may not be a dramatic change.
If you are looking to save more than $100 a month by refinancing, then you might be disappointed. You might have better luck paying off your mortgage over a period of 20 years rather than 15. If you are looking to save the most money, consider that the illustrated example indicates a savings of $6,626.77.
Should You Take a Longer Mortgage?
If you are looking to save more money per month, then you might want to consider a longer-term mortgage. The problem with longer mortgages, though, is that they usually have higher interest rates. You might be able to save money each month, but over all you will be paying more money for the house. If you can afford to make the higher monthly payments, then you can save thousands of dollars by taking a shorter mortgage.
In general, mortgage refinance rates will lower your payments, but you should always make sure that the rate on your new mortgage is lower. Depending on when you decide to refinance the mortgage, you might be able to save a considerable amount of money.
When you refinance a mortgage, you are looking to lock in a lower interest rate so that your overall mortgage costs less money. Ideally, this means that your mortgage payments should decrease, unless you have decided to shorten the length of the loan.
Most people that refinance their mortgages know their payments will be lower, but they might not understand how the new rate affects their payments. By discovering how much your payments will change, you will be able to make informed and accurate plans for the future.
How Much Will a Lower Rate Affect Your Payments?
Many variables can determine exactly how much you owe on your mortgage. To keep things easy, we’ll look at the simplest variables. Let’s say that you currently owe $200,000 on a mortgage that has 15 years left, and an interest rate of 6.23 percent. Assuming all of this information is correct, your monthly payment its $1,712.67.
Now, let’s say you are refinancing and locking in a new interest rate of 5.89 percent on a 15-year mortgage. This will make your monthly payments drop to $1,675.85. Depending on your perspective, this may or may not be a dramatic change.
If you are looking to save more than $100 a month by refinancing, then you might be disappointed. You might have better luck paying off your mortgage over a period of 20 years rather than 15. If you are looking to save the most money, consider that the illustrated example indicates a savings of $6,626.77.
Should You Take a Longer Mortgage?
If you are looking to save more money per month, then you might want to consider a longer-term mortgage. The problem with longer mortgages, though, is that they usually have higher interest rates. You might be able to save money each month, but over all you will be paying more money for the house. If you can afford to make the higher monthly payments, then you can save thousands of dollars by taking a shorter mortgage.
In general, mortgage refinance rates will lower your payments, but you should always make sure that the rate on your new mortgage is lower. Depending on when you decide to refinance the mortgage, you might be able to save a considerable amount of money. |
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