The document summarizes a CNN article that outlines how refinancing a mortgage into a 15-year term at a lower interest rate can save $50,000 over 9 years compared to a 30-year term. It provides an example of how refinancing a $280,000 loan with 25 years remaining into a 15-year term at 4.375% interest could save $175,000 in interest versus keeping the 30-year term at 5.125% interest. It notes that while this strategy is effective, borrowers must be able to qualify and have sufficient equity. For those who cannot afford higher monthly payments, refinancing into a 20-year term could still save $44,000 over 10 years

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CNN: Save $50,000 in 9 years The Week Ahead -> The “Keys”
Tim McLaughlin - No real critical data other then the Fed Minutes
Last Friday, CNN ran a special documenting the top 10
substantial money saving tips for consumers today. The Date Economic Release Prediction Last
number one tip: refinance your mortgage. Their headline was
“Save $50K in 9 years” and they went into great detail to lay 4/5 ISM Non-Manufacturing 60.0 59.7
out how this could easily be accomplished assuming one
qualifies. Being in the business, maybe we are too close to it 4/5 FOMC Meeting Minutes - -
to see the value at times, but here it is spelled out in detail:
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The way to do it is to refinance into a lower rate while
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simultaneously reducing the payment terms. In this example,
you will save 60% more in interest by refinancing into a 15 4/7 Continuing Claims - 3714K
year mortgage rather than a 30 year term at recent rates (say
4.375% for a 15 year vs. 5.125% for a 30 year loan). Note 4/7 BB Consumer Comfort - -46.9
your monthly payments will also rise, but you will pay back
more of the principal over a shorter term, thus capitalizing on 4/7 Consumer Credit $4.800B $5.014B
a lower rate and reducing your principal balance in a much
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shorter timeline. In this example, on a $280,000 refinance of a
30 year loan with 25 years left on it, your payments would rise 4/8 Wholesale Inventories 1.2% 1.1%
$260 a month but you would save nearly $175,000 in interest
and pay off your mortgage a decade sooner.
Secondary Marketing Takeaways: And while this
This strategy is very effective “if your current rate is above CNN article was targeted towards money saving
5% and you don't expect to move for at least three years…it initiatives in a refinance sense, if certainly adds a lot a
pays to make an inquiry with your lender," says Frank Nothaft, value and is something to explore in the purchase market
chief economist for Freddie Mac. as well. With the spring market upon us, and borrowers
looking for money saving solutions, a suggestion of a 15
Albeit, there are some questions related to this. One, can year or a 20 year mortgage may make financial sense in
you qualify, and do you have enough equity? Many times the long term to many would be buyers with rates as low
borrowers will not pursue this strategy because they are not as they are in the current environment.
sure, or because it just doesn’t make sense to investigate.
This is a very simple process, and your Weichert Financial =================
Gold Services Manager can help you analyze this. Second,
not sure if you can swing the higher payment? There are other For many prospective borrowers, while the thought of
alternatives; for instance, look instead at a 20 year loan, which reducing the duration of their financing is something that
will get you close to the goal. At recent rates around 4.875%, they would like to do, but are unable to do at the current
you'll save $44,000 over 10 years on that $280,000 refi and time, maybe reducing the current payment is something
$115,000 over the life of the loan, while cutting your monthly that is appealing as an alternative.
payments by $18, in the scenario detailed above. For those in the second camp, hybrid ARM loan
structures are back in vogue. Borrowers can get a 5/1
The second step is making the decision that you can hybrid ARM with a fixed payment for 60 month with a
“invest” an additional $200 to $300 a month in a 15 year or 20 note rate in the 3’s with no points paid. Perfect for that
year mortgage to reduce the term of your loan and to deeply first time homebuyer who is looking to maximize payment
reduce your interest payment life of loan. But the first step, as they are just starting out, in addition to purchasers
again, is to talk to your Weichert Gold Services Manager to who feel they may be moving up or relocating in the next
understand the refinance trade option and get all the details. 5 years. Need help understanding hybrid ARM’s? We can
help! Ask us how.
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