Refinancing – Shorter term or longer term?

Minneapolis, MN:  Mortgage interest rates have been hovering at or near historic rates for sometimes now. Most everyone with a home loan is thinking of refinancing.  There are many important items to consider, and an experienced, licensed mortgage loan officer should be more than willing to address all your concerns.

NOTE: Don’t confuse an unlicensed bank application clerk with a licensed mortgage professional.

One major area to consider is the loan term, also known as loan amortization.  This simply means “how many years” are you going to have the loan.  The most popular loan term is still a standard 30-year loan, but you can also pick 10-year, 15-year, 20-year, and 25-year terms too.  A few lenders, like Mortgages Unlimited in St Paul, MN., also allow for any number of years from 8-years to 30-years.  This is an excellent option if you have say, 22-years left and want a new 22-yr loan.

In refinancing, the amortization term question is simple.  Do you want the smallest possible payment (30-yr), or do you want to pay it off faster with a shorter amortization term and a bigger payment.

BENEFITS: Longer loan amortization terms give you the smallest possible payment, but you pay dearly for that with having a mortgage forever, and paying huge amounts of interest.

Shorter loan amortization terms come with higher monthly payments, but you pay the loan off dramatically sooner and save possibly hundreds of thousands of dollars in interest.

BOTTOM LINE: Run a MORTGAGE CALCULATOR to see what payments would look like, then using the answers given, picking the right number of years in your loan amortization to fit you and your individual situation.


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