Save

Thousands

on Interest

Save Thousands On Interest

What is the Benefit?

A rate and term refinance can result in substantial interest savings in two main ways: Rate Reduction and Term Reduction.

Let’s breakdown both benefits in detail:

Rate Reduction

For a loan amount of $300,000:

- 0.5% rate reduction will save $30,600 over the 30-year term
- 1% percent rate reduction will save $60,200 over the 30-year term

In both scenarios, the savings would be double those figures. Even a small rate reduction can save a lot over the long term.

Long term is key here and this is how bankers make money. We always encourage homeowners to consider the long term just like the banks to beat them at their own game.

This is the reason why it can make sense to pay points to buy down your interest rate contrary to the claim that a no point loan is always the better option. Although points may initially add up to a few thousand dollars, long term, the savings are often 4-6 times the initial investment of the points.

It is all in the math and we are always happy to do the mathematical calculations for you to see if a rate reduction makes sense in your case with or without points.

Term Reduction

Homeowners can save a lot of interest over the life of the loan when they shorten the loan term.

Consider these examples:

Scenario 1

Loan Amount: $300,000
Interest rate of 4%
Monthly Pay ment: $1,432/month
Over 30 year term, you pay a total of $515,608. In other words, borrowing $300,000 costs $215,608 in interest over 30 years.

Scenario 2

Loan Amount: $300,000
Interest rate of 3.25%
Monthly Pay ment: $2,108/month
Over 15 year term, you pay a total of $79,411 in interest, which saves you $136,000 in interest versus the 30 year loan!

Both loans are for the same loan amount, however, the scenario with the shorter term saves over $136K on interest. We encourage clients to consider the long term carefully (like the bankers do!) and if possible, shorten the term to a 20 or 15 year loan to save on BIG on interest.