When refinancing, determining the right term of your loan is an important decision, after all you want to continue making your mortgage on time, with little or no addred stress to your life. If you are currently in a 30 year mortgage, you most likely would consider doing a 25, 20, or 15 year term, but it it the right decision?
Having spoken to accountants and financial advisers, there are several schools of thought on refinancing. Many think you should stay in a long term (30) mortgage, while others think going to the shorter term (15) is the way for folks to plan. Sometimes the decisions are based on your income tax bracket and others, which I have listed below for your consideration:1. How long do you plan to stay in your current home?
- Are you subject to a potential job transfer?
- Are you considering downsizing in the near future?
- Is your company going through a re-organization
2. How long have you been in your current mortgage?
- Does the lower rate make good sense?
- Have you lived in the house long enough to have some equity built in?
- Maybe keeping the same term and reducing the rate, makes good sense for your cash flow, releasing more funds to pay down other debt.
3. Can you afford the shorter term?
- Can you afford shortening the payment; for example from a 30 year term to a 15 year?
- What is your current debt to income?
- How much will you save? For example, if you have a 30 year term with 25 years remaining and refinance using a 15 year, you have just reduced 10 year of principal and interest savings. This can be significant, but can you afford the payments?
Here is the bottom line, you are unique. Yes, everyone has their own particular set of circumstances as to whether or not to lessen, remain the same, or even extend the term of their exisitng mortgage.
At Delaware Financial Capital Corp., our job is to help you ascertain what makes sense for you. Give our team a call at 302-266-9500! We will brainstorm with you to see which term makes the best sense for you and your family.