3 Reasons Why a 15-Year Contract May be Better
Most homeowners automatically think it has to take 30 years to pay for a house. That’s why many people are surprised to find out that refinancing to a 15-year contract is possible for them – and often makes more sense.
If you currently have a 30-year contract, refinancing to a 15-year one can allow you to:
1- Own your own home outright much faster
2- Benefit from lower rates
3- Save thousands of dollars by paying off your contract sooner
A 15-year contract may be more affordable than you think because cutting the length of the contract in half does not double the payments. Depending on the value of your contract and your old and new rates, the shorter contract might add a few hundred dollars a month to your payments. And the savings over the life of the contract can be significant.
Here’s an example of how it could work:
Let’s say Laila bought her home 5 years ago. She financed $275,000 with a 30-year contract at a rate of 4.5%, paying $1,393 per month. After 5 years, she has $250,000 left to pay.
Now, she notices that rates on 15-year contracts have fallen to 3.25%, and she decides it’s time to refinance. Since she’s decided to pay off her home sooner, that raises her monthly payment by $363 – an amount she can now afford.
In the end, not only will she be done with home payments 10 years earlier, she will have saved $65,000 compared to her original contract.
Your Account Executive can run the numbers for your particular situation so you can compare the costs and savings.
How do you know if this is worth looking into? Basically, refinancing to a 15-year contract may be a good option if one or more of these situations describes you:
* You’ve been paying for your home for several years
* You’ve been paying extra to pay off your home faster
* Your home value has risen
Even for homeowners who already have a 15-year contract, it’s worth checking on a refinance, because refinancing can save homeowners money with today’s lower rates. Refinancing is also an opportunity to free up home equity for other pressing needs like tuition, business investments, and home repairs.
We’re here to support your Islamic Home Financing needs.
Your Guidance Residential Account Executive is here to help with any questions. Rates have dropped to historic lows! Have a friend or family member who is looking for a home? Call 1.866.Guidance, or start an application today.
Have friends or family members that may be in need of down payment assistance, check out our down payment assistance for qualified buyers.
