You may have bought your home 7-years ago and have been making extra payments to get your loan balance paid down quicker.Â You want to pay off your home loan as fast as you can; a refinance may make sense at todayâ€™s lower 15 YR fixed mortgage rates.Â
If you had at $300,000 loan at 6% paid over 30-years you can have the same 15-yr fixed mortgage payment at $247,000 at 3.75% Fridayâ€™s 15-yr rate.Â For many this can trim years from the life of your loan.Â If you are buying a new home, the same $247,000 15-yr mortgage is $581/month more than the current 30-yr option.Â This represents almost $7,000 per year.
The keys to evaluating if reducing your payment term is the right move for you are the following:
1. Â Â Is your monthly income secure?Â If there is a risk of a change in the monthly house hold income it may make sense to stay with a new 30-year mortgage and make extra payments towards principle.Â If a life change happens then you have the option to make a lower payment.Â A 15-YR mortgage is a commitment to the higher payment.
2. Â Â Consult your financial advisor, does he/she offer you a better return on your extra cash by investing it for your future retirement.Â Even if you are closer to retirement what can be done with $7,000 more per year?
3. Â Â Are you years away from needing to have your home paid off?Â There is a belief that higher inflationary times are ahead.Â In this case future dollars will have less spending power.Â You may benefit from using cheaper future dollars to pay off you home than using todayâ€™s higher value dollars to do so.Â
Remember that your mortgage is one of the last tax deductible payments â€“ your true after tax cost on your loan is the interest rate x (1-tax rate) â€“ as an example if you refinance to a 4.125% rate and had a tax rate of 30% then your real cost on your mortgage is 4.125%*(1-.3) = 2.8775%.Â This is very inexpensive borrowing.Â See bullet point 3 again.
Let us do a case study for you and we can help you evaluate your options.Â We will provide a payment example tool which will allow us to compare a 15-yr, 20-yr and 30-yr mortgage option for you. Â Â
All our best for the upcoming week.Â
@ The Valeo-Croy Team, we are here for you.
The Valeo-Croy Team -Â (704) 366-7711
Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421