Mortgage Refinancing - Lower Interest Rates Mean Bigger Savings

You probably already know qualifying for a lower rate when mortgage refinancing will save you money; however, do you know how much you'll save? Even if you only qualify for a quarter point lower interest rate you can still save a boatload of cash over the lifetime of your mortgage. Here are several tips to help you qualify for a better interest rate and illustrate the potential savings from mortgage refinancing.

One factor that affects your interest rate when mortgage refinancing is the term length you choose. Mortgage refinancing with a shorter term length will get you a lower rate than a traditional 30 year mortgage. Loans with 15 year terms are a popular choice when mortgage refinancing. You can improve the mortgage rate your lender qualifies you by cleaning up your credit and paying down your debts. Here is an example to illustrate the potential savings by qualifying for a lower mortgage rate.

Suppose you qualify for a 6.5% interest rate when mortgage refinancing $100,000. Your monthly payment at this rate will be $871 on a 15 year mortgage and $632 on a 30 year mortgage. The total amount of finance charges you will pay for these loans are $56,798 at 15 years and $127,520 at 30 years. You can see how much you save in finance charges when mortgage refinancing with a 15 year loan, but what if you qualify for a lower mortgage rate?

Suppose you qualify for a 6.0% mortgage rate on the same loan for $100,000. Your monthly payment amount at this reduced rate would be $844 with a 15 year loan and $600 with a 30 year mortgage. The total finance charges in this case are $51,844 for 15 years and $115,820 for 30 years. This lower .5% on your mortgage rate results in a savings of $11,700 on a 30 year mortgage!

You can now see how choosing a 15 year mortgage and qualifying for the lowest possible mortgage rate will save you thousands of dollars and is well worth your time and effort. To learn more about your mortgage refinancing options, including costly mistakes to avoid, register for a free mortgage tutorial.

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Posted in: Bigger,Interest,Lower,Mortgage,Rates,Refinancing,Savings