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Refinance Your Home without Setting the Clock Back

Are you planning to refinance your home? When you do this, the clock would also reset. What this means, is that you might actually be turning time as far back as 30 years even when choosing to refinance. What we suggest is that if you are just a couple of years away from paying your debt, refinancing is definitely not what you should opt for. Still, there is some good news for you. For most homeowners, you can refinance your mortgage without resetting the clock! Sounds good? Let’s take a look at how this can be done.

The most popular loan term is 30 years, and the rate is fixed. When you refinance, the loan term would restart again. However, the current rates in the industry are as low as 4% now, and you can use rate reduction to reduce payments. What this means is that you should make the same payment on a new mortgage that is made on your current loan. With this approach, you would enjoy a lower interest rate while paying your debt off faster.

As an example, suppose you loaned an amount of $300,000 in January 2009 at a fixed rate of 5.5% and a loan term of 30 years. The current balance of the loan is now $282,000 and your mortgage payment is around $1,700. Now instead of refinancing, you can take another loan of $282,000 at about 4.3%. This means that you would have to pay $1,400 in monthly payments which is less than what you were paying before. You can either save $300 or do something different. Obviously the former is not what we suggest.

In such as situation, our advice would be that you let the monthly payments of the new loan also be $1,700 because doing this would allow you to pay off your debt faster. Should your financial situation change, you can start paying $1,400.

With this being said, you should keep the following tips in mind if you want a better deal.

  • If you are planning to make higher monthly payments to pay off your loan faster, make sure you can bear the amounts each month.
  • Your total loan amount should be less than your initial principle balance.
  • Opt for a deal that provides you with the same inertest rate or a reduced one.


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