Why are the majority of Frisco and Texas refinance applicants more interested in lowering their monthly payment rather than accumulating fast equity and ownership of their home?
Get your mind right and think with “lazer accuracy” and taking a better option with a slightly higher monthly may taste really good.
After talking to the car salesman, you wonder, “Can I afford an extra $300 right now if I just trade in my perfectly good PAID OFF car for A newer one? Does it make financial sense”?…and you rack your brain to try to make it make since.
Refinancing from a current 30 year fixed mortgage to a 15 year fixed mortgage make LOTS of since. Rates are probably higher than when you bought years ago, and the 15 year rates are lower than the present 30 year rates, so it makes the switch to the lower term feasable and does not kill your bank account. So, you can increase your payment by $200-$300 and refinance your home into a 15 year note and MAN THIS MAKES SINCE!
Let me illustrate how your sacrifice of an extra $200-$300 a month can make you really happy in just 3-5 years my.
Appraised Value Home of $200,000, with a current rate of 6%, and a current principle and interest (not including taxes and insurance) of $959 a month, current loan amount after buying this home 3 years ago with an original loan of $160,000 is now $153,734. Moving along as is, the balance on the loan in 5 more years (8th official year as this example is estimating figuring that the refinance is on a home that has been owned for 3 years to now)is just $140,435. Then, after 5 more years or 10 years from the prospective refinance this example chose not to take, the loan amount is $122,497.
Now lets say in this case that the person decided to take a 15 year mortgage and refinance their home that they have had for 3 years. The pay off of the 3 year old loan would be $153,734 as mentioned above, and the rate might be at 4.75%, after rolling in all the costs to refinance (I way over estimated to make my point), the new loan amount would be $160,000, and the new Principle and Interest payment would increase by exactly $285 a month. After the first year alone, your new loan would be paid down to $152,503 (you made up your cost to refinance in the first year). Now look at the details below to see what your new loan would be moving forward through the years and the savings you have made comparible to if you were still in the 30 year loan.
Year 2 balance of new loan – $144,643
Year 3 balance of new loan – $136,402
Year 4 balance of new loan – $127,760
Year 5 balance of new loan – $118,698 (savings of $21,737) This means you have $21,737 more in paid equity/principle in your home in just 5 years from refinancing than you would have if you stayed in your current 30 year loan. Graduating up to a larger home might be more possible now with that kind of equity when you sell.
Year 10 balance of new loan – $66,350 (savings of $56,147) This means that just after 10 years from the refinancing you made up $56,147 more in equity than you would have.
NOTE: IF YOUR HOME IS A HIGHER VALUE HOME, START THE MULTIPLYING AND START SAVING NOW.