With today’s turbulent housing market people are viewing a house as more of a comfort rather than an investment and are staying in their homes longer. Many homeowners are refinancing at a lower rate with a shorter term because mortgage rates have been so affordable. This is a big trend I have seen over the last year with rates coming down.
Before deciding on refinancing to a shorter term, possibly going from a 30 year mortgage to a 10, 15 year or even a 20 year, you must realize that it brings a higher monthly payment and it may not be realistic if you are on a tight budget. If you have the extra money to put forth into your mortgage you could save money on interest as well as pay off your mortgage faster. You will also build equity faster as your property value increases and your mortgage decreases.
If you don’t have enough income to pay the increase in monthly payments for a shorter term, you could always add more money to your principal payments when you can, to help pay off your mortgage faster. Traditional 30 year mortgages give you financial stability with low, affordable monthly payments. You have the ability to increase your personal savings with a 30 year mortgage because of the lower payments. The 30 year gives you flexibility for the unkown situation that may arise where you could use smaller monthly payments, however your rate will be higher than the shorter term fixed mortgages……although in today’s market all of these rates are historically great!