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One Of The Most Common
One of the most common reasons for refinancing a home is to lower your monthly payments. You may lower your payments by lowering your interest rate, extending the term of your mortgage or a combination of both. For example: you bought your home with a mortgage of $100,000 with an interest rate of 9% and a term of 30 years. Your monthly principal and interest payment is $804.62. You have lived there for some time now and reduced the principal balance on your mortgage to $80,000. You are approved for a new mortgage at 7%. Your closing costs are $5000. Your new loan amount will be $85,000 (you’re including the closing costs in your new mortgage.) your new principal and interest payment will be $565.51. You will save $239.11 every month! You can use that extra money to compensate for a decrease in income or increase in expenses. Or, if your income and expenses have remained stable, you can put that money into a savings account or use it to pay down the principal balance of your mortgage.
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