Brent D. Miller
Home Mortgage Consultant
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Pay Off Your Mortgage Sooner

Should you pay down your mortgage sooner?

We can help you understand your options to repay your mortgage.

If you are a homeowner looking to repay your mortgage sooner, you may want to consider a refinancing to a shorter-term loan. Learn about refinancing from the nation's #1 home refinance lender.

What are the benefits and considerations of faster repayment with a shorter-term loan?Show Details

 
A shorter repayment period can help you:
 How does loan term affect how much I pay? In general, the longer your loan term, the more you'll pay in total interest.
  • Pay down your mortgage debt more quickly. Repaying your loan in a shorter time period may allow you to focus on other priorities such as a child's college tuition or saving for retirement.
  • Reduce the overall cost of interest. Although your monthly payments on a shorter-term mortgage will likely be higher than on a longer-term mortgage, you may also be making fewer interest payments over the life of the loan.

 
While faster repayment with a shorter-term loan does have advantages, it can also mean:
  • You may have higher monthly payments because the loan term is shorter.
  • You may receive a smaller tax deduction than you typically would receive with a longer-term loan. (Consult your tax advisor on the deductibility of interest.)
  • You will pay origination charges as well as closing costs for your new loan.

How can I decide if refinancing may be right for me?Show Details

 
Before you decide to refinance to repay your loan faster, consider the following so that you make a well-informed decision:

What are the estimated costs?
When you refinance, you may pay:
  • An origination charge , which may include fees such as application or processing.
  • Discount points to lower your interest rate further. (May be tax deductible. Consult your tax advisor regarding deductibility).
  • Other settlement charges such as appraisal, credit report, title search, and title insurance fees.

If you're an existing Wells Fargo Home Mortgage customer, you may be eligible for a streamlined refinance with no closing costs, application, or appraisal fees.1
Find out more about our streamlined refinance.
lightbulbYou may be eligible for a reduced reissue or refinance rate on your title insurance if the property's current policy was issued recently. Ask your title or closing agent if you qualify.
 

Does my loan have prepayment penalties?
  • If there's a penalty for early payment of your current loan, this will add to the refinance cost.


How long will I stay in my home?
  • If you plan to say in your home for an extended period of time and the current interest rates are 0.5% to 0.625% lower than the rate you're paying, refinancing may be the right choice for you.


How can I determine the break-even point?
  • You may benefit from our Refinance Calculator, which easily compares your existing loan with a new loan.
  • Your break-even point occurs when your savings from your new loan equals the cost of getting the new loan.

Over time, you may be able to break even on your refinance closing costs.
 

Interested in cost-free repayment options without refinancing?
Before you decide if refinancing is the right choice for you, learn about other options to repay your loan more quickly.

What financing basics should I understand?Show Details

 
If you obtain a new loan to help you pay down your mortgage sooner, you will repay more than you borrowed. In addition to your interest rate, term and loan amount, how much you repay is determined by several factors. Here are the components you need to know:
Interest Rate
  • The interest rate is the percentage of your loan amount we charge you to borrow money for your new loan.
  • Interest rates are based on current market conditions, your credit score, down payment, and the type of mortgage you choose.
Discount points
  • One point equals 1% of your mortgage amount.
  • If you qualify, you may be able to pay one or more points to lower your interest rate. A lower interest rate means lower monthly mortgage payments.
  • You may be able to finance points as part of your mortgage amount.
  • Points are usually tax-deductible. (Consult a tax advisor on the deductibility of discount points.)
Origination charge
  • The amount that includes all charges (other than discount points) that all loan originators (lenders and brokers) involved will receive for originating the loan.
  • This charge covers items including fees, document preparation, and underwriting costs, and other expenses.
  • If you qualify, you may be able to finance the origination charge as part of your mortgage amount.
Loan term
  • Your loan term is the amount of time you have to pay off your mortgage balance.
  • Shorter loan terms typically mean higher monthly mortgage payments, but often have lower interest rates. And if you pay off your mortgage balance within a shorter term, you may pay less in total interest than with a longer-term mortgage.
Remember that interest rates tell only part of the story. The total cost of a mortgage is reflected by the interest rate, discount points, and origination charges. This total cost is known as the annual percentage rate (APR), which is typically higher than the interest rate. The APR enables you to compare mortgages of the same dollar amount by considering their total annual cost.
What is PITI? PITI stands for the four elements that make up most mortgage payments: Principal, Interest, Taxes, and Insurance.
Your monthly mortgage payment is typically made up of four parts:
  • Principal is the amount of money you borrowed.
  • Interest is the cost of borrowing the money.
  • Taxes are the property taxes charged by your local government. Typically we collect a portion of these taxes in every mortgage payment and hold the funds in an escrow account for tax payments made on your behalf as they become due.
  • Insurance refers to homeowners or hazard insurance that provides protection against losses from property damage due to wind, fire or other risks. Like taxes, insurance costs are typically collected and paid from an escrow account.

View loan options now.

Depending upon your property location, property type and loan amount, you may incur other monthly or annual expenses such as mortgage insurance, flood insurance, and homeowners association fees.
 

What should I know about a shorter-term refinance?Show Details

 
Refinancing to a shorter-term loan means you may reduce the number of years in the term of your loan. A shorter repayment loan generally provides:
Less principal and more interest is paid at the beginning of your loan
How do my monthly principal and interest payments change over time? On a fixed-rate loan, initially more of your monthly payment goes toward interest. Over time, more goes toward your principal balance.
 
  • In the beginning, you will make payments that are more heavily weighted to the payment of interest as opposed to principal.
  • As the term of the loan progresses, you will gradually begin making payments that are more heavily weighted to the payment of principal as opposed to interest.
  • Because your mortgage term is shorter, your monthly payments may be higher, depending on the interest rate of your current loan, the original loan amount and the new loan amount.
  • If you select a longer-term loan, your monthly payment may be lower but the amount of interest paid over the life of loan typically will be higher.

Are there other options to repay my loan more quickly?Show Details

 
 Extra payments toward your loan principal can help you reduce the years on your mortgage.
Refinancing is not your only choice for repaying your mortgage quickly. As a no-cost repayment option, consider sending additional principal payments with your regular payments.
  • Principal payments will decrease the loan balance, reducing the overall interest owed.
  • You can send any amount, whenever you have additional funds, such as when you get a tax refund or an employment bonus.

Learn more about setting up automatic mortgage payments or home equity account payments.
 

What criteria are used to assess my application?Show Details

 
When your application is complete, we review the following four components:
Income:
  • Do you have a reliable, continuing source of income to make monthly payments?
  • Income can come from primary, second, and part-time jobs, as well as overtime, bonuses, and commissions.
  • You may use other sources of income if you want them considered for payment – including retirement or veteran's benefits, disability payments, alimony, child support, and rental or investment income – provided they can be verified as stable, reliable, and likely to continue for at least three years.

Learn more about establishing and improving your credit
 
Current debts and credit history:
  • Do you pay your bills, loans, credit cards and other debts on time? We examine your payment habits before deciding to loan you money.
  • Your credit history and credit score also are examined prior to our deciding to loan you money.
  • It's a good idea to check your credit history and correct any problems before applying.

Assets and available funds:
  • Do you have enough funds for closing costs?
  • You may use funds from a savings account, certificate of deposit (CD), investments, and retirement fund.
  • In some cases, you may be able to use a gift from a relative, friend, employer, or not-for profit organization.
  • In many cases you will also have to demonstrate that you have additional funds in your accounts to cover several months of mortgage, tax, and insurance payments.

The property:
  • What is the market value of the property?
  • We will order a property appraisal to make sure your property's value meets our underwriting requirements.

Responsible lending guidelines

We approve applications where we believe the borrower has the ability to repay the loan or line of credit according to its terms. We use two ratio-based guidelines to evaluate your ability to repay.
What is debt-to-income ratio? Debt-to-income ratio is the percentage of your monthly income that is spent on monthly debt payments.
 
What is housing-to-income ratio? Housing-to-income ratio is the percentage of your monthly income that is spent on monthly housing payments.
 
Debt-to-income ratio:
  • Your expected monthly mortgage payment (principal, interest, taxes, and insurance) plus your other monthly debt obligations to your gross (pre-tax) monthly income are compared.
  • Mortgage program guidelines vary, but a good rule of thumb is to keep your total debt level at or below 36% of your gross monthly income.
Housing-expense-to-income ratio:
  • We also compare just your expected monthly mortgage payment (including taxes and insurance) to your gross monthly income.
  • Mortgage program guidelines vary, but a good rule of thumb is to keep your housing expense level at or below 28%.
Even if you fall within the 28%/36% rules of thumb, make certain that you feel comfortable making your monthly mortgage, insurance and tax payments and the payments on all your other monthly obligations. Homes have other costs—such as utilities, maintenance and repairs—that may not exist if you rent.

What can I do if I am having difficulty making my payment?Show Details

 
If you are facing payment challenges, don't wait another day. We're here to help you understand your options.
MortgageHome Equity
If you're struggling to make your monthly payments, or think you may have difficulty making payments in the future, find out about possible options that may allow you to keep your home in our Get Help with Payment Challenges section.
  • Getting started online
  • Call 1-800-678-7986
    Monday – Friday, 8 am – 9 pm, Central Time
    Saturday, 9 am – 2 pm, Central Time
The Wells Fargo Home Equity Assist program was created to help home equity customers through difficult times. If you're having financial difficulties, you may be eligible for a reduced monthly payment or gain more time to repay your loan.
  • Call 1-877-628-9584 today for more information.
  • If you don't have time to call now, you can request an appointment for a Home Equity Specialist to call you at a time that is convenient for you.
Brent D. Miller
Home Mortgage Consultant
NMLSR ID 404017
 
Office: 1-425-468-8638
Fax: 1-866-746-5890
Toll Free: 1-800-643-0528 Ext.8638
Contact Us
 
10900 NE 8TH ST Suite 1430
Bellevue, WA 98004
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Discount Points

 
A discount point is 1% of your loan amount.
 
 
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Origination Charge

 
One amount that includes all charges (other than discount points) that all loan originators (lenders and brokers) involved in the transaction will receive for originating the loan. This includes any application, processing, underwriting fees, and payments from the lender to the broker for origination.
 
 
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Title Insurance

 
An insurance policy that protects a lender and/or homebuyer (only if homebuyer purchases a separate policy, called owner's coverage) against any loss resulting from a title error or dispute. On a refinance, if the property has had a recent title insurance policy, a homeowner may sometimes be eligible for a reduced rate on the title insurance (also known as the reissue or refinance rate).
 
 
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PMI

 
Private mortgage insurance (PMI) is insurance written by a private company that protects the lender from losses in the event the borrower defaults on the mortgage. Borrowers are required to pay the premium for private mortgage insurance. Private mortgage insurance limits a lender's exposure to financial loss resulting from loan default. If you make a down payment of less than 20%, even if you have a good credit profile, lenders generally require private mortgage insurance.
 
 
 

If you are a servicemember on active duty, prior to seeking a refinance of your existing mortgage loan, please consult with your legal advisor regarding the loss of any benefits you are entitled to under the Servicemembers Civil Relief Act or applicable state law.
1 Closing documents must be witnessed and notarized. You may need to pay a minimal fee to a notary public.
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