The Benefits of a Shorter Term Loan

With rates on the downswing, refinancing your home mortgage loan could land a better interest rate. Refinancing with a short-term loan can be accomplished with low equity and a less than perfect credit rating. Monthly payments will be an increased amount, but the rewards include faster payoff and a lower interest rates.

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.

Provided that you have a solid monthly cash flow, a short term refinance can be a wise move. This is due in no small part to the increased monthly payment amount. On the plus side, many short term refinance loans have the same interest rate as their long term counterparts, so you will pay the same interest for a shorter period of time resulting in saving a nice amount over the life of the loan.

If equity is your goal (and it should be), a short term mortgage refinance should be a definite consideration. Your equity will build much more quickly because you are paying the principal amount of the loan faster – and equity is based on the amount of principal you have paid down. Higher payments means that you’re paying more on the principal which means – you guessed it – more equity, more quickly.

Why is equity important? Equity is the monetary value of your property. Higher equity brings you much closer to owning the property outright. There will be less debt associated with the property, which increases the value. Home improvements and educational expenses are more easily financed as a result of the higher equity.

Higher monthly payments may be more difficult to make but the loan will require less time to pay off. More funds will become available for future endeavors associated with family vacations and retirement.

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!