Refinance to a lower term (and often a lower interest rate).
This approach works well if 10 or 15 year mortgage rates are lower than the interest rate on your current longer term mortgage.
The idea: Refinance from a longer term to a shorter term mortgage to save money on interest and to shorten the duration of your loan.
Why it works: 15 year fixed rate mortgages are currently .75% or more below 30 year fixed rates. If you are able to lower your interest rate by refinancing to a shorter term mortgage, the savings will be two-fold: lower interest paid to your lender and fewer payments before you have no payments at all. A word to those who are looking at payments only: Check out the interest component of your payment each month! While the monthly payment is typically higher on a 10 or 15 year fixed rate mortgage than a 30 year fixed rate mortgage, the amount that you pay in interest to your mortgage company is based solely on the interest rate and current loan balance. At a lower interest rate, you pay less money to your mortgage company. The remainder of the monthly payment is yours to keep, invested in the equity of your home. Imagine a person moving a $20 bill from one pocket to another. The money still belongs to the person – but it has moved from one place to another. Provided your home value remains the same or increases, principal payments to your mortgage are yours to keep. If you find it difficult to make yourself pay extra principal on your mortgage each month, you may find that refinancing to a lower mortgage term provides the structure that you need to save money.
What to do: Call me or another trusted loan originator and inquire about current 10 and 15 year fixed interest rates. Tip: Ask if there are ways that your lender might cover regular closing costs and pay them on your behalf during a refinance.