Paying your loan off in a shorter period of time is not only a surefire way to save money over the life of your loan, but it is also a way to obtain an attractive rate on your mortgage. If shortening the length of your new loan to a 15 or 20 year loan fits into your monthly budget, then consider going the short term, conventional mortgage route.
If you don’t think you can handle higher monthly payments with a short-term loan, go with the longer term and make additional principal payments as circumstances allow. Though you may not get the best rate available, you’ll avoid getting stuck with a high contractual monthly payment that is a stretch for your monthly finances.
If you’re a homeowner with great credit and plenty of equity, odds are those lower rates are within your reach. But if your score is less than desirable, work at improving it by paying all of your bills on time, paying down your credit card debt, keeping your credit lines open and increasing your credit limits.
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