Information on Refinance home loan texas

Pat and Sammy Martin had 23 years of payments left on their mortgage when they refinanced at a lower interest rate. They got another 30-year mortgage--and the payoff date is still 23 years away.

The Martins knocked about seven years off the loan term by making half a mortgage payment every two weeks. In effect, the residents of Denton, Texas, make 13 monthly payments a year. The payments are deducted automatically from their checking account by their mortgage lender, Colonial Savings of Fort Worth, Texas. Colonial calls it the Interest Saver Program.

"We did the Interest Saver Program because it knocks seven years off the mortgage and it also saves like $40,000--a lot of money," Pat Martin said.

As the Martins' example shows, refinancing with a 30-year mortgage doesn't require paying for another 30 years. You can shorten your repayment period by paying extra every month or year. With help from a mortgage calculator, you can specify the payoff date you want and figure out exactly how much extra to pay monthly or annually to reach your target.

"Many people want to not increase their term if they're refinancing. They say, 'I have 22 years left, and I want to set up the new loan for 22 years,'" said David Motley, loan production manager for Colonial Savings. Through the Interest Saver Program, Colonial will set up what Motley calls a "synthetic amortization" to pay off the loan early, at a target date specified by the borrower.

About 20 percent of Colonial's servicing customers use Interest Saver, Motley said.

Not all lenders offer early repayment programs such as Colonial's, but that might change in 2003 as mortgage companies seek to extend the 2-year-old refinancing boom. Lenders believe that about half of the homeowners who could lower their monthly payments by refinancing haven't done so.

"I think there are large chunks of people who are above 7 percent," said Bob Walters, vice president of secondary marketing for Quicken Loans. "It blows my mind that these people haven't come in."

Walters gives a hypothetical example of someone who got a 30-year mortgage four years ago, with a payoff date in 2029. He wants to refinance with another 30-year loan, but his heart is set on paying if off in 2029.

"I would tell them to take the 30-year [mortgage] and set up your amortization schedule to pay it off over 26 years," Walters said. "I don't think people realize they can do that."

An amortization schedule is a list of regular equal payments that will pay off a debt in a specified period. If you want to pay off a 30-year mortgage in, say, 26 years, you can ask the lender to figure out the payments for you or work out the numbers yourself in an online mortgage calculator. Bankrate.com has one at www.bankrate.com/ brm/mortgage-calculator.asp.

The mortgage calculator lets you plug in the amount of the loan, the interest rate and the term, or length, of the loan. You can specify the term in years or months.

Let's say you wanted to borrow $100,000 at 6 percent. The mortgage calculator would tell you that your monthly principal and interest would total $599.55 if you repaid over 30 years. Shorten the repayment period to 26 years and the monthly principal and interest rises $34.13, to $633.68. So an extra $34.13 a month shortens the repayment period by four years.

If you decide to add to your payments so you can pay off the mortgage by a certain date, it's a good idea to check with the mortgage servicer to find out if you're paying the correct extra amount. Make sure your extra payments are applied to principal.

E-mail Holden Lewis at hlewis@bankrate.com.

Scripps Howard News Service