If you’re like most people, you don’t want to remortgage and give the lender more money than you have to. But, if you’re like most people, that’s exactly what you do.

When you accept the remortgage terms.

Typically, homeowners remortgage or refinance without thinking much about the terms, only about the interest rate and the monthly payments. Those who do only wonder if they can afford a loan amortized over 15 years instead of 30.

For most people, 15-year loans have monthly payments that are too high, so most people get them for 30. They do it when they first take out the loan, they do it every time they remortgage or refinance it.

The other way of handling remortgages and refinances is to set your term to whatever years are left on the original loan. This is not common and you might even think banks don’t do it.

If your bank does indeed not give home loans except for 15 and 30 years and you really want to give them the new mortgage, you can accept the 30-year loan but treat it like it had a shorter term. Simply make extra payments – to match what the payments would have been had you taken out a shorter loan.

If you just accept the 30-year term and make the payments based on 30 years, you lose a lot of money. Especially if you remortgage or refinance more than once.

If you take out a home loan amortized over 30 years, make payments for 3, then remortgage and take another 30-year loan, it will take you 33 years to own your home outright. If you make payments on the new mortgage for 4 years, then remortgage or refinance again and again you take out a 30-year loan, you’ll own your home outright after 37 years.

That’s the common way of dealing with home loans and remortgaging.

You could do it the second way. Namely, you take out a mortgage loan for $202,000 at 7%, amortized over 30 years. Then, after 3 years, remortgage at 6%, but amortize over 27 years. Then, 4 years later, remortgage again at 5%, but amortize over 23 years.

With the second way of remortgaging, you pay off the home loan in 30 years from the time you took out the first loan, so 7 years sooner than with the first way. You also pay $47,000 less to own your home outright. $47,400.84, to be specific.

What can you do with $47,400.84?

If you have already remortgaged or refinanced, visit any bank or mortgage outfit online, go to their mortgage calculator and figure out what you should be paying each month to finish paying off the loan within the 30-year term of the original loan. Then make additional payments every month.

The original principal, the interest rates, and how long in the life of a mortgage you refinance determine how much money you lose. But you always lose if you take 30-year loans every time you remortgage.

The next time you remortgage, triple-check with yourself how bad you need the 2 or 3 hundred dollars monthly payment reduction. Bad enough that you’d pay over $47,000 to have it?

Remortgages are complex transactions. It is easy to make bad choices, easy to overlook choices. If you don’t know enough.

Author Bio: Dan M. Kennedy: Remortgages are complex transactions. Remortgage like most people do and pay the lender more money then you have to. Some people make so many mistakes (and don’t even know it) that they undo the advantage they get from the current mortgage rates being so low.

Category: Finances
Keywords: remortgage,remortgages,bad credit remortgage,adverse credit remortgage,current mortgage rates,