As a mortgage holder, you know that your interest rate can significantly impact how much money you have to spend on your mortgage. If you are currently struggling to pay a mortgage with a high interest rate, you may be able to greatly reduce your mortgage interest rate with mortgage refinancing and save yourself some money on the expensive process of paying off your home.
Lower Monthly Payments
One of the many benefits of refinancing your mortgage and lowering your home mortgage interest rate is that you are often able to obtain a lower monthly payment. Through the refinancing process, your payments will drop significantly as a result of refinancing for a lower principal amount at a lower rate. To illustrate the benefits of qualifying for the lowest mortgage interest rate, consider the following example:
John and Jane currently have a $200,000 mortgage on their home. They opted for a 30-year loan term and qualified for a 6.25% interest rate. Their monthly payment is $1231.43. Over the course of the loan term, they’ll pay a total of $243,316.38 in interest. Given the fact that home mortgage interest rates are at an all-time low, John and Jane may want to consider refinancing their mortgage to take advantage of the lowest mortgage interest rates. If they refinanced now, they would qualify for a 5.25% home mortgage interest rate. By refinancing at this lower rate, their monthly payments would drop to $1104.41 and they would pay a total of $197,586.67 in interest. Refinancing would save them $127.02 on their monthly payments and 45,729.71 in interest.
Smaller Overall Debt Burden
As you can see from the example above, you can significantly reduce your monthly payment obligations by refinancing your home. In addition, you are able to save more than half on the costs of interest. Since overwhelming debt can paralyze you and hinder your progress towards your financial goals, obtaining significant debt reduction can help you regain control over your finances. Your home is your greatest financial asset—don’t let it become your biggest burden.
Extra Money to Invest
With the money you can potentially save on your monthly mortgage, you will be better able to plan for your financial future. You can keep the money for security, or invest it in 401(k), retirement, IRA or college funds. If you want to use your refinancing savings to build your home equity, you can reinvest the extra cash back into your home through home improvement projects.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
