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 the loan.

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 don't hesitate to email me at or call me directly at: 435-668-7885.  Service to you, is important to me!