Mortgage loan amortization is a difficult concept to wrap your head around for many homeowners but describes the process of building equity in your home as you pay down your principle loan balance. The problem with any mortgage refinance is that you’re resetting the clock on your loan amortization, trading ownership in your home for today’s lowest mortgage refinance rates. There is however a way to refinance your mortgage without taking a hit to your home equity. Here’s an article by Dan Green of the MortgageReports.com describing how you can take advantage of favorable refinance rates without restarting the clock:
As a homeowner, your “total cost of homeownership” is tied to your mortgage. The higher your mortgage rate, the more interest you pay over time. And regardless of your mortgage interest tax-deductibility, over 30 years, mortgage interest accrues into something fierce.
As Dan points out you can pay down the balance on your mortgage much more quickly simply by paying the same amount you have been on your new home loan. You’re already used to paying this amount so your budget won’t suffer and the excess is paid directly to your principle balance.
Of course you’re not directly recouping your closing costs or origination fee by doing this; you do this by paying yourself back from the savings on your new payment. In the grand scheme of things your savings are building equity in your home and reducing your finance charges so you are in fact benefiting from Dan’s strategy.
The less you pay at closing by avoiding lender junk fees and minimizing your origination fees the more you’ll benefit from your mortgage refi. You can learn more about taking advantage of today’s best mortgage refinance rates without paying unnecessary fees or markup by checking out my free Underground Mortgage Videos.