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Mortgage Refinancing: How You Can Shorten the Term of Your Loan

by Gabriel  Traverso
Mortgage Directory Columnist

The world of home mortgages is not black and white--everyone has different needs and priorities. If your need is to build equity in your home, then refinancing to a shorter term can help you.

Why Refinance?

One of the biggest reasons today's homeowners decide to refinance their mortgage is to get lower monthly mortgage payments, especially when refinancing from a high-cost mortgage such as interest-only loan. If your goal is to build up equity in your home at a faster rate than simply making extra payments allows, then it's time to consider refinancing your mortgage to a shorter term. For example, if you have twenty years left on your current mortgage, refinance to a fifteen-year loan to accomplish your goals sooner and save a great deal of money on interest payments--you can even refinance to a ten-year mortgage!

Use a Mortgage Calculator

When you refinance your mortgage to a shorter term, you can naturally expect that your monthly payment is going to be higher--unless your current mortgage interest rate is much higher than today's rates. You need to carefully consider your financial situation, however, before making the decision to refinance to a shorter term. Go online and find a mortgage calculator and look at the different rates available today and how your monthly payment can change with the loan term in which you're interested. By using a mortgage calculator, you can more effectively budget your monthly bills and make sure you don't bit off more than you can chew. You can also use a mortgage calculator to see how making extra payments help, you build equity in your home.

Compare Your Refinancing Options and Shop Around

When refinancing your mortgage, one of the most important moves you can make is to shop around with more than one lender--regardless of the reasons for your refinance. Not all lenders work with the same types of loans, and not all lenders can offer the same deal. Make sure to compare similar loan terms so that you're really looking at an apples-to-apples loan comparison.

About the Author
Gabriel Traverso is a freelance writer, independent musician, and artist. He resides in Reno, NV.

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