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Basically this product is not designed for everybody. If a person has a full retirement and a saving plan and has not refinanced in the last ten years, then this plan is not for them. There are many fixed rate products, but why refinance to save $50 to $75 a month? Look closely at any amortization schedule and examine the balances the first three to five years. A thirty year mortgage was designed in a deliberate way to tremendously benefit the lender. The first few years, the client does not build up much principal. On a $1330. payment principal and interest, at 6.875% for 200k, you are paying approximately $183. a month principal the first year. After five years you have paid about 1.2% a year average on your principal.

If you refinance again and start over at that point, you have a downhill cycle. After 20 years of doing that every five years, at 1.2% average a year being paid on the balance, you will still owe 76% of your balance and 30 years to pay. Even at 6.5%, the amount of the balance that is actually paid is 6.3% after five years. If the rate was even 4.5%, which doesn't exist, the balance doesn't go down much the first five to seven years. Is the issue rate or paying down a loan? If you are going to refinance during that first seven to ten years, you are starting over and you are paying the early years over and over. The math is a bit one sided in favor of the lender.

The 30 year block note is back end loaded, for a tremendous amount of your principal is going to be paid down the last fifteen years, ( 76% ) if you ever get to that point. As a matter of fact, with a 30 year note, you still owe 35% of your balance the last five years. Now you know why our great grandparents were wise in not refinancing. They knew better! Unfortunately people are forced to do it anyway because of the changing times, so they deserve a product that meets those needs. People are demanding flexibility and options and updated products.