If you’re considering refinancing to take advantage of today’s low refinance mortgage rates you might want to avoid resetting the clock on your home loan’s amortization schedule. Mortgage Amortization describes the process of paying your home loan back over time; in the early years the majority of your payment goes to pay the interest and gradually over time shifts to paying down the mortgage principal balance.
Mortgage refinancing resets the clock on your home loan’s amortization and you’re back stuffing your payments in the lender’s pocket rather than building equity in your home. Here’s an article by Dan Green of the Daily Mortgage Reports with a practical suggestion for refinancing without resetting the clock:
The Reverse Of “Starting Over” With Your Mortgage
There’s a common refrain among homeowners facing refinance scenarios. It goes like this: “These low rates are excellent,” they say, “but I’m already 6 years into my loan and I don’t want to start over. I don’t want a new 30-year fixed rate loan.”
If you decide to keep making your existing mortgage payment on the new home loan you’ll build equity at an accelerated rate; however, you’re not going to recoup your closing cost from mortgage refinancing. In order to recoup your loan origination fee and other lender costs on the refi you have to lower your payment so this strategy never really recoups your expenses. Think of it as an investment in your home so you’ll want to avoid paying junk fees as much as possible. Common junk fees include rate lock fees, loan processing fees, application fees, and broker courier fees.
You can learn more about getting today’s lowest refinance mortgage rates while avoiding lender junk fees by checking out my free Underground Mortgage Videos.