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The Benefits of Mortgage Refinancing With a Shorter Loan

Apr 7, 2008
With rates the way they are, it can be a perfect time to refinance your home mortgage loan to take advantage of a better rate. Not enough equity in your home? No problem! You can still refinance with a shorter term loan with low equity or less than perfect credit. Though you'll have higher monthly payments, you will reap the rewards much quicker with a shorter loan term.

Mortgage refinancing allows applicants to find the best and most affordable interest rates. More interest is paid out on long-term loans and interest rates may be higher. Average mortgage loans have a 30-year repayment schedule. A 15-year loan produces significant savings over the loan duration.

Short-term refinancing requires a consistent monthly cash flow due to the increased monthly payment established in the terms of the loan. Short-term refinance loans may have the same interest rate as long-term counterparts, but the interest rate will be paid for a shorter duration and decreases the amount of interest paid on the loan. This saves money over the life of the loan, which is much shorter.

Equity is the primary goal of refinancing. With short-term mortgage refinancing this goal is reachable. While equity builds more of the payment is applied to the principal portion of the loan. Equity is based on the principal that has been paid down as the payments are made. An increased payment amount allows a larger portion of the funds to go directly on the principal portion and decreases interest that is accrued.

Equity is important because this reflects the monetary value of your property. Having higher equity will enable you to eventually own the property outright. With less debt associated with the property the value increases. Home improvements and educational expenses are more accessible as a result of the increased equity.

A higher monthly payment may 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 quickly 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 allows you to begin the process of reducing or eliminating debt while building equity.

Is a shorter term mortgage refinancing loan the right solution for you and your situation? Only you and a mortgage loan specialist or financial advisor can answer that question. You won't know until you ask!
About the Author
Want to know more about mortgage refinancing? Go and visit www.allaboutmortgagerefinancing.com and learn about Top Mortgage Refinancing Companies and other related subjects.
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