| A 15-year loan term has many advantages, although | | | | because it rakes in more profits. To counter loss in |
| it may appear to be expensive because of the higher | | | | future profits, lenders penalize borrowers for paying |
| monthly amortization. However, a shorter loan term | | | | their mortgage ahead of term. This is why |
| assures you that you'll be free from this burden | | | | prospective borrowers should always inquire if the |
| before or at the time of retirement and save | | | | lender charges prepayment penalties. |
| thousands of dollars. Consider having your loan | | | | Assuming that your lender does not charge penalties |
| restructured to a shorter loan term. | | | | on prepayment, you have to contend instead with |
| Benefits of a Shorter Loan Term | | | | the closing costs for your refinance mortgage loan. |
| The prospect of spending 30 years paying back a | | | | Others get a refinance mortgage loan to switch to a |
| mortgage is discouraging. If you have 20 years | | | | short term interest only loan. They are banking on |
| remaining on your loan, the option to shorten your | | | | the equity of the house and intend to sell it in the |
| loan term to 15 can be tempting. Taking away 5 | | | | near future. The proceeds of the sale will go to the |
| years from a 20-year loan means a higher monthly | | | | interest and they can still have extra money from |
| bill, but freedom from the mortgage after 15 years | | | | the profit. In your case, you're looking at the full |
| instead of 20 is definitely more appealing. But if it's | | | | ownership of your home in a shorter time. |
| only a matter of a few hundred dollars more, why | | | | For a new loan, you can decide if you want a fixed |
| not? Never mind if you'll be paying a higher monthly | | | | rate mortgage or an ARM. An online calculator can |
| bill. | | | | compute how much you're going to pay the monthly |
| You'll be saving thousands of dollars from interests | | | | bill in 15 years' time. From the calculations, you'll be |
| alone with the five years knocked off from the | | | | able to determine the feasibility of a short term ARM |
| 20-year loan term. Another benefit is building your | | | | or fixed rate refinance mortgage loan. |
| home equity faster. A refinance mortgage loan offers | | | | Short Term or Long Term? |
| the chance to restructure your terms. | | | | A short term, or traditional loan, will always depend |
| What's Involved | | | | on your financial situation and future plans. A |
| For a home mortgage, the lender will pull your credit | | | | short-term refi is ideal now that interest rates are |
| record to check if you've been paying your debts on | | | | low. You'll be surprised that you'll be paying the same |
| time. You'll also be paying the fees involved before, | | | | monthly fee as your first mortgage, so there's not |
| during, and after your loan is processed. | | | | much of a change in the monthly bills. The prospect |
| The lender will assess all the information to evaluate | | | | of paying off your loan in 15 years, however, is |
| if you are a good risk for a shorter loan term. If | | | | imminent. For those who feel secure with the stability |
| you're dealing with the same lender, the process | | | | of the traditional 30-year loan term, switching from |
| won't be as rigorous and as lengthy like it would be if | | | | an ARM to a fixed rate refinance mortgage loan is |
| you go to a new lender. | | | | recommended. |
| It's a fact that lenders prefer long-term mortgages | | | | |