Now that we have at least 20 percent equity in our Florida home, we are planning to take advantage of the low interest rates. When it came to refinancing, I always thought that I'd be doing well to refinance to a 15-year fixed loan. But after crunching numbers and looking at the options, we decided to go for an 8-year fixed loan offered through the "YOURgage" product that lets you pick your term.
It's the second time we will be refinancing. My husband and I were able to score a free refinance about two years ago through my mortgage company. Our current interest rate is 4.625 percent.
Saving on total interest
We currently owe $104,000 on our home. Based on information from our mortgage company, if we continued to pay the minimum amount on our mortgage, we'd have our home paid off in 12 more years.
Making a smaller monthly payment
Our current monthly payment is $1,222. If we refinanced to a 12-year fixed at 2.875 percent, our payment including taxes and insurance of $230, would be $1,084. By choosing the 8-year refinance, our mortgage including taxes and insurance, will be $1,443. Even though it sounds as though we would be making a larger monthly payment, it doesn't work out that way since we have been paying extra on our mortgage every month.
Meeting our goals
We are opting for the 8-year fixed loan so we can meet our goal to pay off our home in our 40s. It's nice to be able to pick mortgage terms that keeps us on track without even trying. I'll no longer have to send extra payments every month and yet we will still be mortgage free by 50. Term flexibility means we aren't stuck with the more common 15 or 30 year terms that might tempt us into taking forever to pay down our mortgage.
Giving us more options
Paying off our mortgage in 8 years will give us more options and a better cash flow. We will be able to stay in our home even if we move to one income. We'll have more money for traveling, renovating and decorating. If we decide to buy another house, we can turn our current home into a rental property. Currently other homes in our neighborhood fetch $1,300 a month.
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