Personal Finance News Tuesday 6/25

Phil's Personal Finance Tip of the Day:

5 reasons we're glad we refinanced to a 15-year mortgage

By Kristie Farnham | Yahoo! Contributor Network 

My husband and I purchased our home in Hudson, Wis., in 2011 with a 30-year mortgage. In the months following our move in, we found ourselves questioning that 30-year term. Currently in our 30s, it dawned on us that we would most likely have grandchildren before our mortgage was paid off.

Sure, we could pay it off sooner by making extra payments each month, but we knew it would be difficult for us to follow through unless that payment was a requirement, not a mere option. We decided to reevaluate our finances and look into shortening the term of our home loan.

So in August 2012 -- just a year after buying our house -- we refinanced. We went from a 30-year 4.25 percent mortgage to a 15-year loan at 3.375 percent. Our monthly payment increased by over $350, from a principal and interest payment of $875 a month to $1,229.

This increase was not insignificant in our budget. We had to make changes in our lifestyle, including restraint when it came to purchasing things that we didn't necessarily need.

Now in Summer 2013, a year after our refinance, there are several reasons why we are pleased with our decision.

1. Savings. Our initial 30-year loan was for approximately $177,000 at 4.25 percent, which meant we would have been charged more than $136,000 in interest. Our refinanced 15-year loan is for about $173,000 at an interest rate of 3.375 percent, which reduces our finance charges to around $48,000. So, while an interest rate differential of .875 percent may not seem like much at first glance, our interest savings as a result of refinancing amounts to over $88,000.

[Want to refinance and save on your mortgage? Click to find a lender now.]

2. Money for college. In 14 years, our two older children will be in college and our youngest will be a sophomore in high school. We save as much as we can every month but realize that it may not be enough to cover the costs associated with putting these three through college. By eliminating our mortgage early, we will have extra money to count on when the bills for higher education start rolling in.

To read the entire article from Kristie Farnham | Yahoo! Contributor Network :http://homes.yahoo.com/news/5-reasons-were-glad-refinanced-15-mortgage-171700719.html


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Hi my name is Philip J. Miano and I am the founder of PJM Personal Finance and Productivity Coaching specializing in Budgeting, Debt Reduction, Bank Reconciliations, Goal Setting, Time Management, and Organizational skills. Please visit my website: http://pjmcoaching.com.