Mortgage Refinance

Should you refinance for a shorter-term loan?

New home buyers often choose to take out longer term mortgages such as a 30 year term on their new homes due to the security and peace of mind that a consistent monthly mortgage payment provides. However, a few years into the mortgage many start to realize that a 30 year term is a really long time. It is especially long when they have to start thinking about things like putting their kids through college or saving for retirement. The low interest rates that have been typical throughout this year have many home owners refinancing their mortgages at a lower interest rate. However, these historic low rates have also seen home owners securing shorter term loans.

Paying off your mortgage sooner will free up a lot of cash that can be used for other upcoming commitments. It also means you will save money in interest over the life of your loan because you are paying down your mortgage significantly faster. But can you really afford to do it?

People who have a steady and reliable income are prime candidates for mortgage refinancing because they can afford the bump in expense that a shorter term loan will most likely bring. For example, a 30 year loan of $100,000 at 4.5% would cost roughly $506 per month (principal and interest). A 15 year loan at the same rate would be approximately $765. For home owners who currently already have some extra disposable income at the end of the month the $259 increase between the two terms would be manageable. However, a higher debt to income ratio would be required on the 15-year term because of the higher monthly payments.

Refinancing a home for a shorter term makes sense for those home owners who have an interest rate of 4% or higher and who have not refinanced in the past six months. It also makes sense for people who are looking to build equity in their home sooner.

Is there an option for home owners who don’t meet the criteria to refinance? For those home owners who are afraid of committing to a larger monthly payment or who can’t meet the new income to debt ratio that the shorter term requires, they can still get the same benefits by consistently paying extra on the principal of their mortgage. Another option might be to see if their lender offers a variety of shorter terms such as 18 or 20 years instead of 15 or 10.

There are many things to consider when refinancing a home. However, with today’s attractive low rates it is definitely something worth thinking about.

About Us
Aurora Financial, a leading financial services company, has funded billions of dollars in loans across the United States and serves clients nationwide in more than 18 states and jurisdictions. A Direct DE FHA Lender, Aurora provides a broad range of financial products and services, including consumer banking and credit, corporate and investment banking. Contact us www.auroraf.com or call 1- (877) 887-1117 to find out if refinancing your home loan to a shorter term makes sense for you.

After spending weeks or months shopping around for the best interest rate, how can you as the consumer protect yourself from paying more on your mortgage than you have to? In these volatile economic times ensuring you get the lowest interest rate on your mortgage can seem like a daunting task. It’s just a guessing game full of speculation. Do you sign now or wait for interest rates to decline. What if you wait too long and all of a sudden there is a jump in the market? How can you protect yourself?

Some lenders provide an option called a mortgage rate lock float down. The rate lock portion allows borrowers to secure themselves from rate increases while the float down portion gives them the benefit of obtaining a lower interest rate if mortgage rates go down. Basically a mortgage rate lock float down allows you to lock in at a specific rate. However, if interest rates fall at any point in the application process you can still get the lower interest rate.

Here’s how it works. Let’s imagine a borrower locks in a rate of 4.5% when applying for a first time home buyer 30 year FRM (fixed rate mortgage). However, if the borrower has a mortgage rate lock float down and interest rates drop to 4.0% prior to the completion of the mortgage application then the borrower may take advantage of the lower rate before the mortgage is approved.

Getting caught off guard and suddenly finding that your interest rate has gone down just before closing is not only frustrating after spending so much time and energy sourcing out the best rate; it can also cost you thousands of dollars in unnecessary interest fees. You can avoid paying more than you have to with a mortgage rate lock float down. If mortgage rates decline during the mortgage application process, you can take still take advantage of lower rates if there is a sudden drop in the market. With a rate lock float down you get the benefit of locking in your rate when it is low and if rates decrease even more you can still benefit from that as well.

About Us

Aurora Financial is a Direct DE FHA Lender that has funded consumers with billions of dollars in loans across the United States. A rated on Angie’s List and a five star rating on Google, we promise excellent service and low rates. We are able to close loans in as little as 7 days. Call us today at 877-887-1117.

$500,000 to $766,550 Conforming
30 Year Fixed	6.00%	6.09% APR
20 Year Fixed	5.875%	5.99% APR
15 Year Fixed	5.125%	5.19% APR
10 Year Fixed	5.00%	5.09% APR
$766,551 to $1,149,825 Conforming High Balance
30 Year Fixed	6.50%	6.59% APR
15 Year Fixed	6.00%	6.09% APR
$1,149,826 + Non Conforming / Jumbo
30 Year Fixed	N/A	N/A
15 Year Fixed	N/A	N/A
$400,000 to $766,550 VA
30 Year Fixed	5.75%	5.79% APR
15 Year Fixed	5.375%	5.39% APR
$766,551 + VA
30 Year Fixed	6.00%	6.09% APR
15 Year Fixed	5.75%	5.79% APR
Rates for indication purposes.	Assumptions

877-887-1117 • 2010 Corporate Ridge Road, McLean, VA

Should you refinance for a shorter-term loan?

Can you get a lower interest rate even after locking in on a mortgage?

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