Should you refinance with less than ten years left on a mortgage?

Tim from Lake County, Florida has a home worth a couple hundred thousand and is fortunate enough to only owe sixty five thousand and is at a 5 3/8% interest rate. He is looking for a creative way to pay his mortgage off in the next couple of years. Tim called Robert Palmer to ask if he has any suggestions?

Refinancing is not going to be the solution for someone like Tim. The closing cost such as title, insurance, appraisal fees and taxes will outweigh the savings. With a plan to pay the loan off that quickly there will not be enough time to save money on the interest to make the cost back through savings. Really it is figuring out how much extra can be put towards the payments each month to get the loan paid off as quickly as possible. Each month a bigger payment is made the balance is dropping. As a result there is less interest and more of that payment gets applied towards principal. Create an aggressive plan to put extra money towards that payment for a year or so and it can really make a big difference in how long it takes to pay the mortgage off. Refinancing only becomes beneficial when the loan is going to exist long enough to save enough money in interest to recuperate the upfront cost and have additional savings making it worth it. If the mortgage will be paid off in less than ten years it is most likely not going to be beneficial.