Is It Time to Shorten Your Mortgage?

If you’re thinking about joining the movement of mortgage-burning, you’re definitely in good company. No, no, it’s not some crazy revolution that will topple governments or anything like that. It’s just a movement where homeowners are thinking about actually shortening their mortgages.

This is different than the traditional advice to actually make sure that you focus on getting a mortgage with a very long term so that your monthly payments are a lot less. However, this adds a lot of mortgage interest to your loan, making it harder to pay off your mortgage in the long run. You would be a lot better off to really think about having your mortgage done in a shorter time so that you can save on all of that interest.

Now, this “mortgage burning” party assumes a few things. It’s going to assume that you have a good job with income that you can expect to either stay the same or increase in the years to come. In addition, you also want to make sure that you have other debts taken care of so that you’re not overwhelmed by debt. This is something that really makes it hard to get the benefits of the shortened mortgage underway.

Paying down your mortgage can also make you feel better, and you can end up getting a lot of satisfaction out of knowing that your mortgage will be done and that money will be freed up for other purposes in less time than the 30 year mortgage.

Quicken Loans even has a product out called Yourgage that lets you choose the term for the refinancing — the company reports that the most popular is the 8 year mortgage or the 13 year mortgage. That definitely tends to attract a bit of attention.

You need to make sure that you have good credit and you also need to make sure that you have your credit checked before you even think about refinancing. Keep in mind that the refinancing process isn’t a slam dunk. The lender still has to approve it, and credit terms are getting pretty tight in the down economy. You also need to make sure that you have at least 20% in home equity to even get the best rates. If you don’t have equity in your home, you will have a very hard time even thinking about a refinance deal.

There are some alternatives to refinancing that can really still save you money. You can always send off extra mortgage payments, which would bring down your mortgage while giving you the flexibility to still pay the minimums of money suddenly gets tight. If you are in a field where your income can really tighten at random, you might want to choose this option instead of the refinancing.

Costs are also important here. You want to make sure that you have the ability to handle the 3% to 6% in costs — the percentage will be based on the principal of your loan. That can equal a lot of money, but if you’ve got the cash to pay it on hand, this is definitely a good thing.

The final note is that you still want to make sure that future savings are going to be protected as much as possible. You really don’t want to find yourself going with a refinancing plan or a paydown plan that’s going to keep you from saving for retirement. However, if you’ve already maxed out everything, this is a good idea to turn towards looking at your mortgage with a more critical eye.

Now is the perfect time to start thinking about your financial future as it relates to your home. Check out the details for yourself!

Yet Another Point on Refinancing

If there’s one question that homeowners have on their minds right now, it’s “should you refinance your home, or just keep things the same?” Now there are reasons to refinance a home, and there are reasons not to refinance the home.

Believe it or not, one of the first things that you really need to think about when it comes to the question of refinancing your home is whether or not you plan to make it your permanent residence. If you see yourself staying there for 20 years, refinancing is definitely a good way to save money and negotiate better terms. In addition, many homeowners already know the hassle of having to take on bad terms just to get into a home. A lot of agents say that having a home is such a good value proposition that even if you have to take bad terms up front, you can always refinance.

Now, the truth is a bit different — refinancing is definitely not a slam dunk at all. That means that if you really want to get better terms, you really need to make sure that your finances are in order from front to back and side to side. You need to make sure that you not only have good credit, but you still have plenty of money on hand — you will have to pay fees in order to refinance. Out of all of the facts o n refinancing, people tend to forget this. It’s not a free opportunity at all — refinancing costs money, and you need to make sure that you can afford that part of the process. Closing isn’t as expensive as it was when you first purchased the home, but it certainly can be.

One of the other hidden things about the refinancing process is that your first mortgage might actually have a pre-payment penalty. This means that instead of being able to take care of things on your own without a fee, your lender might charge you a fee because you paid off the mortgage early — meaning that they didn’t get a chance to profit off of you as much as they assumed that they would. Hey, a lender is still in the business of making money — they aren’t just giving you the finances for a mortgage for no reason!

Still, even if you have to pay a penalty, it could still be a good thing to go ahead and refinance your home — crunch the numbers and see where you stand!