With rates on the downswing, refinancing your home mortgage loan could land a better interest rate. Refinancing with a short-term loan can be accomplished with low equity and a less than perfect credit rating. Monthly payments will be an increased amount, but the rewards include faster payoff and a lower interest rates.



When it comes to mortgage refinancing, it's all about the interest. The longer you pay on your loan, the more interest you have to pay. Makes sense, right? The average mortgage loan is 30 years. Imagine the interest money you would save if you refinanced your loan for 15 years!

Short-term refinancing requires a consistent monthly cash flow due to the increased monthly payment established in the terms of the loan. Short-term refinance loans may have the same interest rate as long-term counterparts, but the interest rate will be paid for a shorter duration and decreases the amount of interest paid on the loan. This saves money over the life of the loan, which is much shorter.

The goal is to create equity. Short-term mortgage refinancing makes this goal possible. Equity builds quickly because more is applied to the principal amount of the loan. Equity is based on the amount of principal that has been paid down over the terms of the loan. The increased payment schedule allows a larger portion of the funds to be applied directly to the principal portion of the loan.

Equity is important because this reflects the monetary value of your property. Having higher equity will enable you to eventually own the property outright. With less debt associated with the property the value increases. Home improvements and educational expenses are more accessible as a result of the increased equity.

Though it may be tough to pay a higher monthly bill, you will be paying the loan off in half the time. That means you'll have more time in the long term to spend your money on other things, such as retirement plans or even vacations.

If the option is available to you, you might want to consider refinancing your mortgage loan into a shorter term loan. You will save on the loan value in the long term since you'll be paying more of the principal every month and thus reducing the total interest amount you are responsible for. You'll earn your all important equity much more quickly and most of all, the burden of having a mortgage loan at all will be off your shoulders in half the time.

Is a shorter term mortgage refinancing loan the right solution for you and your situation? Only you and a mortgage loan specialist or financial advisor can answer that question. You won't know until you ask!