Is your new year’s resolution to get out of debt? Did you know that refinancing with today’s low refinance mortgage rates could help you accomplish this goal? Here’s an article from Dan Green of the Daily Mortgage Reports with several strategies for paying off your mortgage and saving a boatload of cash in the process:
When a bank decides your monthly principal + interest mortgage payment, the payment is based on the principles of amortization (ah-mor-ti-ZAY-shun). With respect to fixed-rate mortgages — either conventional, FHA, USDA, VA, jumbo, or other — amortization is the process of paying a loan to $0 over time.
The basic strategy for mortgage refinancing without resetting your home loan’s amortization schedule is to continue making your old payment amount. The difference between the old and new payment amount is applied directly to your mortgage loan’s principle balance. This has the net effect of mortgage refinancing without losing years from your amortization schedule.
In the example Dan gives paying $123 extra every month from mortgage refinancing will pay off a 30-year mortgage in just 23 years! If your goal is to be debt free the strategy Dan describes will get you on the path to achieving your resolution for the new year.