Reducing the term of your loan can save you thousands of dollars, if not tens of thousands in interest, but it is the right decision for you?
First, it is important to consider whether you can afford to simply pay additional principal towards the loan – which is effectively the same thing. And you have the advantage of choosing to stop if you need to. Additionally, it is important to consider whether you can reasonably invest the savings between the longer term and shorter term loan and use that money to your benefit.
Typically you will pay a lower interest rate on a lower term mortgage, so you will pay less interest over a shorter period of time and build equity faster. You will just want to make sure that you have strict budget discipline…the last thing you want to be is “House Poor!”
For most, it comes down to monthly payment. If you can lower your interest rate by refinancing while keeping your monthly payment relatively the same amount AND keep the term of your loan at or below the number of years you have left remaining – than you may have hit the tri-fecta!