Choosing a loan term with the whole horizon in view
Entry 6: the term can change later
Ledger note
Refinancing replaces your loan, and you choose a new term. Refinancing a loan that is ten years old into a new 30-year loan lowers the payment but adds a decade of payments; refinancing into a shorter term can cut years off. Compare total remaining cost, including closing costs, not just the monthly figure.
Last reviewed against the primary sources listed below.
Three refinance term choices
| Choice | Effect |
|---|---|
| Match the remaining term | Keeps your payoff date |
| Shorter term | Earlier payoff, higher payment |
| New 30-year | Lower payment, later payoff, more total interest |
Comparing fairly
Add up remaining payments on the current loan and compare them with the new loan's payments plus closing costs over the same horizon. The Loan Estimate's comparison page helps.
Term questions readers send
How can I cut 10 years off a 30-year mortgage?
Pay extra principal regularly or refinance into a shorter term. Either way, check that the higher outlay still leaves room in your budget.
Does refinancing restart my mortgage?
It replaces your loan with a new one, and you choose the new term. Choosing a full new 30-year term pushes the payoff date later.