Low Rates Can Shorten Your Loan Duration

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Can I refinance to get out of my 30-year loan term?

Low Rates Can Shorten Your Loan Duration

When people buy their first home, they often opt for a 30-year mortgage. With a 30-year mortgage, your payments are spaced out over a longer period of time, which reduces your monthly mortgage payment. Unfortunately, this also increases the amount of interest that you pay out over the life of the loan. This could leave you with less of your own money to save for retirement, fund your children's college savings accounts, and pay off your other debts.

Refinancing when there are low refinance rates can give you the extra edge you need in reducing your overall interest payments. Low refinance rates can help you in two ways:

  1. They can reduce the amount of interest you pay when you refinance your mortgage for a longer term. If you've had your mortgage for just a couple of years, you can refinance your mortgage with a 30-year refinance at lower rates, saving a few thousand dollars over the term of your loan.
  2. They can substantially reduce the amount of interest you pay when you refinance your mortgage to a shorter term. Since your interest rate is already lower, you might be able to now afford the monthly payment for a 15-year mortgage, which will shave off many years of debt repayment and thousands of dollars in interest.

   

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