Baltimore Refinance Guide

You’ve no doubt read many times in many different places that refinancing your Baltimore mortgage at today’s low mortgage rates could possibly save you a lot of money. It’s very typical to look at your existing interest rate, compare it to the new rates, and be happy calculating the extra cash you’ll have every month with a new mortgage. Unfortunately, it is very common for this extra money to never really seem to make it to the point of affecting your life in any real, meaningful way. It’s simply way too easy for your new found money to simply get absorbed into your everyday expenses and before you know it, it’s like it wasn’t even there. The intent of this article is to point out what the true potential is in these otherwise seemingly small savings. There is no doubt that this will require a bit (OK, more than a bit) of financial discipline from you, however, the hope is that when you see what kind of impact this can have on you and your family’s long-term financial future, you’ll be inspired to make the effort and even take pleasure in it.

Let’s run some numbers based on an assumption that your new Baltimore mortgage will be a fixed rate mortgage on a 30 year term. Also for the sake of argument, we’ll say the new mortgage is saving you a total of $175 each month. A bit less than $200 is a nice addition each month, but nothing to get overly excited about, right? Well, it depends… what are you going to do with that money?

In a previous example we talked about paying off other debts, such as credit cards. In that hypothetical scenario we used the numbers of two cards with balances of $4000 and $8000 at interest rates of 16% and 12% respectively. We also assumed that you were making just above the minimum necessary monthly payments and that by doing so it would take you TWENTY THREE YEARS to pay them off…. However, if you were to use a disciplined approach and used your new found savings to systematically pay them down, you could reduce those 23 years to just over 4 years, saving a TON of interest on them.

A second option for your savings could be to apply them to your existing Baltimore mortgage every month to help pay down your principle faster. If you were to do this you could dramatically shorten the amount of time it takes you to pay off your mortgage and again, save you an awful lot of money. How much could you save? Let’s take a look.

We need some specific numbers to work with, so let’s go with the following scenario. We’re going to say that your new mortgage is for $225,000 on a 30 year program at a fixed rate of 5%. If you could get yourself to apply that extra $175 you now have each month towards the principle on your new loan, the time it would take you to pay off the loan would be reduced by more than SEVEN YEARS, which would save you over $58,000 in interest on the loan! That is some serious savings!

It’s obvious that the concept of refinancing to a lower rate is very appealing to a lot of people. However, the thing that often gets overlooked is how significant a difference a small change in your Baltimore mortage rate can have on your long term net worth. And considering the economic situation we’re in right now, doing a little long-term planning might not be such a bad thing.

No matter whether you’re looking at a Baltimore refinance or if you’re considering getting a purchase money loan, do your best to look at the power of small but consistent efforts and how it can impact your overall financial picture.