KartchnerLoans.com - Home Loan Refinance Options in Arizona

A wide variety of home loan refinance options are available, but for most home buyers, there is one clear winner. The 30-year fixed-rate home loan is by far the most common. Even though many of these homeowners might be better served to opt instead for a 15-year fixed-rate home loan. While a 30-year home loan can make the monthly payments more affordable, a 15-year home loan costs combined with historically low refinance rates will end up saving most homeowners significantly in the long run.

While monthly payments on a 15-year mortgage are higher, due to paying off the mortgage in half the time of a 30-year home loan, the amount paid to the bank is much less in the long run. Because the monthly loan payment is fixed, the amount being paid in interest and the amount being paid in principal change over time. In the early stages most of the mortgage payment goes toward interest. Virtually nothing is paid to lower the principal, which is the amount you owe on your home loan. As time goes on, the interest portion of your home loan payment declines and the share of your monthly mortgage payment going towards principal reduction increases. This equation is greatly accelerated with a 15-year mortgage loan.

Refinancing into a shorter-term loan usually means a higher monthly payment, which can make a 15-year home loan seem more expensive. But the reduced term, in fact, makes the loan much cheaper for the homeowner. Over the life of the home loan, a 30-year fixed-rate mortgage will cost the borrower more than twice its 15-year counterpart.

15-year home loans typically come with a lower interest rate that a 30-year home loan. The major advantage of a 30-year home loan is the lower monthly payment. This lower monthly payment can enable the borrower to afford a more expensive house than they would be able to qualify for with a 15-year home loan. Currently, approximately 90% of home buyers choose a 30-year fixed-rate mortgage loan, according to government agencies.

Fannie Mae and Freddie Mac that back most mortgage loans, often impose extra fees, called a loan level pricing adjustment, which makes 30-year home loans more expensive for borrowers. These additional fees usually affect borrowers with smaller down payments, low credit scores, or both. The FHA also imposes higher mortgage insurance rates to 30-year borrowers. Mortgage insurance is usually required for borrowers exceeding an 80% Loan-to-Value ratio.

Financial experts seem to agree that being able to afford the higher payment of a 15-year home loan includes having a forced savings account. A 15-year mortgage is effectively a savings account in the form of increased equity in an asset that typically appreciates.

Some major reasons to refinance your home loan. There are some obvious and other less obvious reasons for refinancing your home loan. One major reason presently is historically low interest rates. This is the leading reason many home buyers are currently deciding to refinance. Many refinancing a home loan that is less than a year or two old. The financial benefit of such a refinance will ultimately depend on how long you expect to own the home.

Many homeowners are taking advantage of today's low fixed interest rates and replacing risky adjustable rate mortgages (ARM). An ARM is a home loan that often offers the borrower a low introductory rate that will rise after a predetermined length of time. If interest rates go up, when the rate resets, borrowers can be in for a payment shock that many won't be able to afford. Borrowers should highly consider refinancing into a fixed-rate home loan before their ARM interest rate resets, especially when fixed rates are extremely low by historical standards. The fact is, no one has a crystal ball and can tell you what will happen to interest rates down the road. But opting for a safe bet is usually a prudent idea, especially if you plan to own your home for a while.

Another popular reason to refinance your home loan is to take some cash out of your home at interest rates that are hard to match. Among the benefits of being a homeowner is the opportunity to build equity. Your home can be an inexpensive source of needed cash. A cash-out refinance at presently low interest rates can enable a higher mortgage balance without increasing your monthly payment. Depending on when you originally got your home loan, it may even reduce your monthly mortgage payment while enabling you to gain some cash for other purposes.

Charlie Kartchner, Mortgage Loan Officer
NMLS 1991026
NEXA Mortgage
2450 S Gilbert Rd
Chandler, AZ 85286
623-252-3008
ckartchner@nexamortgage.com
https://KartchnerLoans.com

If you would like to explore your many options and discuss your particular needs with a licensed home loan professional in Arizona, give Charlie Kartchner at NEXA Mortgage a call today. Or visit online at https://KartchnerLoans.com

This release was published on openPR.