Build Home Equity Faster
Many borrowers use a refinance to shorten the term of the
mortgage. And brace yourself: Even at low rates, a shorter term
means a higher monthly payment. The benefit is that you'll build up
equity faster and pay far less in total interest over the life of
Consider Jim Neill, 48, a stock broker and his wife Merrilyn, 55,
a psychotherapist. Recently, the couple took out a 15-year
fixed-rate loan at 3.75% to replace an 5.13% ARM with a 30-year
term. Their monthly payment jumped by $200, but now they will own
their own home outright by the time they retire. In addition, the
total interest on the 15-year loan will come to $95,447, vs.
$222,234 on the remaining life of the ARM -- and that assumes their
adjustable rate would have held steady at its current 5.13%. "This
is forced savings," says Jim. "When we retire, we can scale down and
take equity out of the house."
BUT, MY idea is this - if you don't want the higher
payments of a 15 year mortgage, simply make 1 extra house payment
each year. This will, in effect, cut your mortgage time almost
in half, and if you do this faithfully - you will pay off your 30
year loan in approximately 17 years!!
The benefit to this is,
you are not obligated to make the extra payment!
When cash is short - make your normal payment. When you have extra funds,
you can send in that extra payment once a year, and still pay off
your loan in almost 1/2 the time!! You save yourself a bundle
of interest when you do this too!!
Or, if you can't afford the payments on a 15-year
mortgage, your next best means of building equity is to refinance
for less than 30 years. To do so, ask your mortgage company to
customize your new loan's term to match the years that are left on
your old loan -- if you are five years into a 30-year mortgage, for
example, ask for a 25-year loan.
I have other ideas to help you build
equity faster...so don't hesitate to email me at email@example.com or call me directly at:
435-668-7885. Service to you, is important to