Refinancing Home Mortgages to Extend Your Term

A mortgage is basically like a giant house-sized savings account. The "savings" is your home equity, which is the appreciation of the value of your home and the amount of principle you have
paid off of your mortgage. The rest of the money is paying interest to the bank for lending you the money. Mortgage math is really quite simple. Say you took out a 30 year fixed mortgage 10 years ago. You've put money towards your interest and principle and your home has increased in value. If interest rates are lower than they were when you bought your home, you can refinance and take out another 30 year fixed mortgage. You are now borrowing less than you had to when you first bought your home, at a lower interest rate, spread out over more time. Your monthly payment is likely to drop considerably. In this situation, depending on your financial situation, you may also want to refinance into a shorter term loan so you can pay off your home that much more quickly.

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