Home loan A primer
When you refinance, your goal is a lower interest rate (at least two points lower than your current rate, and ideally much lower), and probably a longer term. Be cautious about lengthening the term of your home mortgage. Because of interest compounding, adding time to the term will not decrease the monthly payment proportionately. For example, a $100,000 home mortgage with a 5% interest rate and a 15 year term will cost $788 per month. Doubling the term more than doubles the amount of interest you will pay over the term of the loan, but drops your monthly payments by only $252, or less than a third.