Will Refinancing My Home Loan Lower My Payments?

Will refinancing my home loan lower my payments? Read here to understand how refinancing your home loan will lower your payments.

Due to the economic realities which include high levels of unemployment and decreased salaries, many people could benefit from refinancing their mortgage to take advantage of today’s low interest rates. Refinancing a mortgage can lower your home loan payments in a number of ways.

Lower Interest Rate

Another way refinancing your home loan may lower your payments is by receiving a lower interest rate. If you have a $200,000, 30-year mortgage with a 6% interest rate, your monthly payment is about $1,200. If you are able to refinance into a 5% interest rate, your monthly payment would be reduced by about $125 per month. Also, over the course of the mortgage you would save about $45,000 in interest payments.

Extend Repayment Term

Another way refinancing your home loan may lower your payments is by extending the repayment term. If you originally received a $200,000 30-year mortgage ten years ago, you most likely have paid it down to around $160,000. When you refinance your mortgage, you now have the right to re-amortize the remaining balance back over a new 30 year period. While this means you will now have 10 additional years of payments left, you will also have lower monthly mortgage payments.
Another way refinancing your home loan may lower your payments is by decreasing or ridding your need to pay PMI. Most likely, the reason you are paying PMI is because you did not have enough equity in your home when you originally purchased it. If you refinance your home and the appraisal proves that you now have more than 20% equity in your home, you will not longer be required to pay PMI.

Will Refinancing My Home Loan Lower My Payments?

Related posts:

Leave a Reply