The above information really demonstrates the incredible power of interest rates. Lets take a
minute and look at the 27 year examples. The monthly payment listed for the Current Mortgage
is $1,408 and for the Refinance Comparison, is $1,299. Although the initial amount to be
financed was increased by $3,000 (for closing costs) and the interest rate was reduced by only
1%, the monthly payments dropped a whopping $109. That's $1,308 less per year. If you compare
the balances and the monthly payment savings after 5 and 10 years, you will now begin to see
why refinancing this mortgage was a great move. After 5 years, the total savings amounts to
$6,065 and after 10 years, $15,051.
The majority of consumers would choose the 30 year term since their main objective was to lower
their monthly payments. As previously stated, it's not always to your best interest to lower
your payments if the future balances did not warrant the change. However, this example would
make perfect sense for the homeowners since their payment was lowered by $158 per month
($1,408 - $1,250). Please note that the difference in future balances was not that substantial.
The reduction of monthly payments would create a savings of $1,896 annually and their balance
in 10 years would only be $6,109 more. For most families, the additional $1,896 of spendable
income each year would be greatly welcomed.
The tremendous power of interest can really be seen when you look at reducing your current
mortgage term of 27 years to a reduced term of 20 years. The current monthly payment above is
$1,408 and the new proposed payment would only be $1,484, a mere $76 difference. While these
2 payments are very close, keep in mind that this homeowner would be cutting 7 years off their
mortgage term. When you review the future balances above, you will be able to see that this
homeowner would have gained $32,742 in 10 years ($164,893 - $132,151). Do you know of an
investment today that would be worth over $32,000 in 10 years for a payment of $76 per month?
That's more than 250% profit on your investment. That's an average of 25% profit per year and
it is risk free.
You can carry the previous example a step further when considering a safe way to invest your
money by going to a 15 year mortgage term, instead of 20 years. If current mortgage conditions
dictate an interest rate of 6.25% on a 30 year mortgage, you could probably reduce your
interest rate 1.625% on a 15 year term. Therefore, we used a rate of 5.625% (7.25% - 1.625%)
on the comparison above and cut 12 years (27 years - 15 years) off the current mortgage for
only $264 per month ($1,672 - $1,408). Now take a look at the loan balance after 5 years. If
this home was sold at that time, this homeowner would have netted $32,380 ($185,584 - $153,204)
which would be more than double their investment. If you were going to sell your home in 5
years, wouldn't you prefer receiving an additional $32,380? Sure you would.
One of the main reasons that most homeowners don't refinance is because they just don't seem
to find the time to sit down and discuss all of the pros and cons with their bank or mortgage
company. We have really made it easy for everybody. We can take all the information that is
needed to get you approved in about 10 minutes and we can even do it over the phone. Imagine
that, we can get you approved without ever making a trip to our office. How easy can it be?
Hopefully, the above comparisons have helped you to understand just how important it is to
refinance your mortgage after carefully examining all of the facts. We know that is quite
difficult for most individuals to compile this type of information. That is exactly why we
offer a "free cost comparison". We, at Louisiana Mortgage Associates in Lake Charles
want to be your "One-Stop Shop" for your "Homegrown Home Loan". If you
are calling from other parts of the state, please call us toll-free at