Philadelphia Refinance – Do It Today And Save Big For Years
There’s no doubt that you’re aware of today’s low Philadelphia mortgage rates and considered refinancing your home loan to save yourself some money. The tendency of course, is to look at how much you’ll save every month and simply be happy with that. The problem with this approach is that very often, this extra savings and extra cash each month never really seems to effect your life in any meaningful way. With all of your everyday expenses, it’s just way too easy for this new found cash to get re-distributed without making any real, significant impact for you. Hopefully this article will illustrate that there is actually some pretty significant potential for you to impact your financial picture with these savings. It is true that it will require some financial discipline from you, .
Let’s run some numbers based on an assumption that your new Philadelphia mortgage will be a fixed rate mortgage on a 30 year term. Also for the sake of argument, we’ll say the new mortgage is saving you a total of $175 each month. This is a reasonable amount of money, but it’s no ‘lotto’ right? Well what are you going to do with that money?
One option that we discussed in a previous example was paying off other debts, such as those on existing credit cards. In that example we imagined that you had 2 cards, one with a balance of $4000 at 16% interest rate and another with an $8,000 balance at 12%. We showed that if you had been making just above the minimum monthly payments before, the pay-off would take 23 years. If you now started using your extra monthly savings from your refinance, you could shorten the payback period to about 4 years.
Another smart application of that money would be to apply it towards your existing Philadelphia mortgage to help pay down the principle faster. By doing so, you could shorten the length of time it takes to pay it off and save you a whole lot of money. How much? Let’s take a look at some numbers.
We need some specific numbers to work with, so let’s go with the following scenario. We’re going to say that your new mortgage is for $225,000 on a 30 year program at a fixed rate of 5%. Now let’s imagine that you applied that $175 every month towards the principle on the loan (above and beyond your regularly scheduled mortgage payment), you would be able to pay off the loan in about 23 years rather than 30 which would translate into you saving over $58,000 on the total cost of the loan! That’s not chump change…
There is no doubt that getting onto a lower fixed rate mortgage is very appealing to a lot of people out there. However, the thing that often gets overlooked is how significant a difference a small change in your Philadelphia mortgage rates can have on your long term net worth. And considering the economic situation we’re in right now, doing a little long-term planning might not be such a bad thing.
No matter whether you’re looking at a Philadelphia refinance or if you’re considering getting a purchase money loan, do your best to look at the power of small but consistent efforts and how it can impact your overall financial picture.