Somerville refinance
For your Somerville refinance loan, would you prefer an interest only loan, which doesn’t pay any principal, or a traditional loan that pays both interest and part of the principal each month? The difference is usually determined by the rate of equity appreciation in your neighborhood as well as the percentage of investors versus the percentage of homeowners in your area. If the equity appreciation has traditionally remained strong in your neighborhood, or at least not negative, then an interest only loan might be worth considering. This will allow you to buy a better house for the same payment. If the percentage of homeowners versus investors is high in your area, then there is a strong likelihood that homes will not decrease in value, so again an interest only loan may be worth consideration. However, if the percentage of investors is high, for example over 10% of new homes are bought by investors, then you probably would not want to refinance with an interest only loan.
If you are seeking the security of a fixed payment, then a fixed rate mortgage is probably best for your Somerville refinance loan. While most fixed rate mortgages are for 30 years, there are several other possibilities including 15 or 20 year terms, which can decrease the amount of interest that you have to pay over the life of the loan.
Sometimes it is worth refinancing your Somerville refinance loan just to pay off your mortgage faster with a shorter term mortgage. While the monthly cost may be higher, you will typically pay 25% less money in interest over the life of a loan. An additional solution can be to make an extra equity payment once a year, which when combined with a shorter mortgage term, will further decrease the interest you must pay over the life of your Somerville refinance loan.
