Shorter Term Mortgage Loan Refinance

The main benefit of opting for a shorter term mortgage loan is that it allows you to pay off your mortgage faster. American Dream Realty can help you determine the best for you.

Let’s break down why this is advantageous:

Faster Loan Payoff:

• With a shorter term (e.g., 15 years instead of 30), you’ll pay off your mortgage faster.
• This means you’ll build equity in your home more quickly.

Lower Total Interest Paid:

• Shorter terms typically come with lower interest rates.
• Over the life of the loan, you’ll pay significantly less interest compared to a longer-term mortgage.

Higher Monthly Payments:

• Be prepared for higher monthly payments with a shorter term.
• However, this also means you’ll own your home outright sooner.

Interest Savings:

• The interest savings can be substantial.
• Use the formula for monthly mortgage payments to compare different terms:

  PMT=(1+i)n−1PV⋅i⋅(1+i)n​

  • (PMT): Monthly payment
  • (PV): Mortgage amount (present value)
  • (i): Monthly interest rate
    • (n): Term in months

Financial Discipline:

• A shorter term forces you to budget and manage your finances more rigorously.
• It can be a great way to build financial discipline.

Risk Tolerance:

• Consider your risk tolerance and financial goals.
• If you’re comfortable with higher payments and want to pay off your home quickly, a shorter term is ideal.

Remember to weigh the pros and cons based on your individual circumstances. Consult with your American Dream Realty financial advisor or mortgage professional to make an informed decision!