Homeowners have been using refinancing as a way to erase their mortgage debt sooner and lower their overall home loan costs. Cash-in refinancing has been used by many homeowners who are able to afford the cost of refinancing and can put extra money towards their mortgage principal.
Refinancing has typically been a way for homeowners to get a more affordable monthly mortgage payment or as a way to access funds from equity a homeowner has gained for the purposes of meeting certain costs. While the popular cash-out refinancing option remains available for homeowners who are looking to get money back from their home in order to pay off or meet other financial obligations, more homeowners are using this period of time where interest rates are low to combat their mortgage debt.
Paying off a home loan faster will, obviously, create an overall lower home loan cost. Homeowners have typically chosen a 30-year fixed mortgage on their home loan due to the fact that thanks to lower interest rates this home loan requires a more affordable monthly mortgage payment. While lowering monthly mortgage payments with refinancing has been incredibly helpful for certain homeowners, those who are able to meet the costs of refinancing and apply additional funds to their mortgage principal may erase their mortgage debt faster and at less cost.
A homeowner who meets their minimum monthly payment on a 30-year fixed mortgage, for instance, may end up paying almost double the original home loan amount when time and interest are factored in. Even low interest rates, like those that are being offered at the present time, can add up over a 30 year period so homeowners who have the means to do so have refinanced and opted to put cash towards their mortgage principal.
While this is not something that can be accomplished by every homeowner since housing troubles have plagued many due to unemployment, homeowners who are in a good financial standing may stand to benefit by putting more money towards their mortgage payment or principle than is required.
Financial advisers often caution homeowners to make sure they can afford these additional costs before proceeding with cash-in refinancing or with paying more towards one’s principal amount. It’s understandable that homeowners want to erase their mortgage debt as quickly and cheaply as possible, but if paying more towards a homeowner’s mortgage principal causes financial strains in other areas they may erase any benefits gained from a cash-in option.