Refinancing to a Shorter Term

What actually changes

• Rate: shorter terms typically price lower than thirty year terms.
• Payment: higher, because principal is compressed into fewer months.
• Total interest: substantially lower.
• Flexibility: reduced, because the higher payment becomes mandatory.

The flexibility argument

A thirty year loan with voluntary extra principal payments can be paid off on almost any schedule you choose, and you can stop the extra payments in a hard month. The tradeoff is that the shorter term usually comes with a lower rate, so the voluntary approach costs a bit more in interest.

A middle path

Twenty year and other intermediate terms often provide much of the interest savings with a smaller payment jump than fifteen year financing. Ask to see several terms side by side rather than assuming the choice is thirty or fifteen.

I will show you the payment and lifetime interest at multiple terms so you can pick the one you will actually be comfortable with in a slow month.

Educational purposes only. Refinance and VA loan guidelines vary by program, borrower circumstances, property type, entitlement status, documentation and lender requirements. All financing is subject to application, verification, applicable program guidelines and underwriting approval. Not a commitment to lend. Manny Oloyede | Mortgage Broker | NMLS 1824463 | Ultimate Mortgage Brokers LLC. Equal Housing Opportunity.