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If You Can, Go With a Shorter Term

05/15/24

For many people, refinancing a mortgage is a way to get cash for home improvements, to pay off other debts, or to save money with a lower interest rate loan. Another way to save a significant amount of money is to refinance into a loan with a shorter term.

For example, a $200,000, 30-year mortgage at a 5% interest rate will cost over $186,000 in total interest over the life of the loan. The same mortgage for 20 years will only cost $116,000 in interest, a savings of approximately $70,000. Of course, the monthly payment will be approximately $300 higher for the twenty-year loan, but the total savings are significant. When you refinance, think about the interest rate, but also consider whether the savings from a shorter term are worth the higher payment.

Personal – Homebuying and Refinancing

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This article contains general information only. Sunflower Bank is not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, before making any decisions related to these matters, you should consult a qualified professional advisor.