Just because you refinanced your home in the past doesn't mean you can't do it again. In fact, refinancing several times could be the best way to reach that ideal interest rate and loan payment.
And that's exactly what marketing manager, James Zapalla, and his family did. Zapalla has a wife, who is a stay-at-home mother, and two children.
In 2009, the family moved into a 3,600 sq. ft. home with four bedrooms and 2.5 baths in Marlton, a town in Burlington County, southern New Jersey.
"The Zapallas purchased the home in July 2009 for $360,000," says Anthony Melchiorre of Annie Mac Home Mortgage, who handled the purchase.
After a down payment of 25 percent, their original mortgage was for $270,000 with a 30-year fixed term and an interest rate of 5.50 percent, Melchiorre explains. This resulted in a monthly loan payment of $1,533.03.
The First Refinance
The Zapallas refinanced for the first time in September 2011 for a two reasons, according to Melchiorre.
The first reason was to take advantage of lower interest rates. The second reason was to consolidate a $25,000 HELOC (home equity line of credit) loan they had taken out as a second mortgage on the property.
As a result, the refinance lowered their interest rate to 4.25 percent on a new 30-year fixed loan in the amount of $290,000 (which included the HELOC).
The refinance reduced their monthly payment to $1,426.63 - a savings of $106.40 each month.
Melchiorre says that the first question most people ask is why someone would want to reset their loan back to a new 30-year term.
"This is a great question, and you have to look deeper than the initial knee-jerk reaction thinking of this question," Melchiorre says.
In this case, Melchiorre says it made sense for the Zapallas to choose a 30-year loan again, since the borrowers ended up with an interest rate that was 1.25 percent lower than their previous rate.
The Second Refinance
While many homeowners wait many years before refinancing again, the Zapallas did their second refinance about a year later, in August 2012.
"They decided that this was the home they wanted to stay in and wanted to explore options that would allow them to pay their mortgage down quicker," Melchiorre explains.
What's more, Melchiorre says it was a fantastic time to do so, as the interest rates for 15-year fixed loans were extremely low.
Their second refinance took them from their current 30-year fixed term to a new 15-year fixed term in the amount of $292,000.
"We were able to secure them a 15-year fixed rate of 3.125 percent," he explains.
As a result, not only did the Zapallas receive the benefit of a very low rate, but they were also able to cut 14 years from the term of their loan, according to Melchiorre.
Shortening the repayment term of the loan raised their monthly payment to $2,051 each month.
However, Melchiorre points out that the higher payment was worth it to the Zapallas because of how fast they would be able to pay off the loan.
Plus, Melchiorre points out that the Zapallas "will save a whopping $121,668 in interest that would have been paid if they stayed in their current 30-year mortgage."
In the end, Melchiorre says that you don't have to wait until you're in financial trouble to refinance. In fact, in many cases - like in the case of the Zapallas - refinancing just makes financial sense.
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