Should you refinance? | Irvine Real Estate – Irvine Homes for Sale

by Robert Mack on December 20, 2010

in Latest News, Sellers

Low interest rates mean homeowners could save big with a 15-year mortgage

One can hardly go online to pay the mortgage anymore without being bombarded by ads about refinancing that mortgage.

“Save thousands with a 15-year loan!” reads one. “Lock in Mortgage Rates as Low As 2.875 for 15 years,” reads another.

With online applications to get you started, it’s tempting to want to switch out of that typical 30-year fixed-rate mortgage at 6 percent from a few years back. That is, if you’re not gun-shy from the complications of the subprime lending crisis and the raft of foreclosures on people who got themselves in deep trouble by fiddling with their mortgage.

Is refinancing to the oft-touted 15-year-mortgage a good idea? We asked some local experts about the option.

What’s the benefit of a 15-year refinance?

Deborah Sturges, president of Hallmark Mortgage in Fort Wayne, says it’s saving a fistful of dollars in interest over the life of the mortgage.

The savings can happen because interest rates today are lower than when many people first got their mortgage – plus rates on 15-year mortgages are generally less than on 30-year mortgages because lenders recoup their money more quickly.

As an example, she cites hypothetical borrowers who three years ago got a $130,000 mortgage at a 6 percent fixed rate. Their payment (excluding taxes and insurance) is now $780 a month. Those borrowers will pay $151,960 in finance charges over the life of the loan.

But because they’ve already increased equity by $5,000 since buying the home, if they refinanced $125,000 for 15 years at 4.5 percent interest today, they would save $48,410.

“Plus their mortgage will be paid in full at the end of 15 years,” she says. The borrowers also will build equity at a faster rate, so they will be able to keep more money should they decide to sell in a few years, she says, putting them in a better position to finance their next home.

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Check out the benefits of refinancing your home loan to a 15 year rather than 30 year! The savings are astronomical!

Posted on Irvine Orange County Real Estate Market News

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