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Lowering your mortgage payment - it can
be easier than you think!
Is your budget in a bind every month due to a high mortgage payment?
You may benefit from refinancing.
If you are facing unexpected expenses, or your financial situation
has changed, you may want to consider refinancing your mortgage
to lower your monthly payment.
If you have an adjustable rate mortgage, chances are that it will
"reset" in the next few months to a higher rate, and continue
to adjust every year. Or interest rates may have gone down considerably
sInc.e you took out your present mortgage. Refinancing may enable
you to lock in a better rate. Perhaps your financial situation is
such that it's taking you longer than you originally estimated to
pay off your loan. In that case, extending the term of the loan
and paying it off more slowly could also reduce the amount you have
to pay each month.
No matter what your situation, you should always weigh the costs
and benefits of mortgage refinancing to determine if you'll come
out ahead.
Your mortgage may have a 30-year term, but not many homeowners stay
with the same loan for that long. That's because paying off your
present mortgage and taking out a new one can mean big savings over
several years. However, mortgage refinancing comes with a price
in the short term, so it's important to consider both the costs
and benefits before deciding whether or not to refinance.
Should you refinance?
If any of these situations apply to you, you may want to consider
refinancing your current mortgage:
" If rates have dropped sInc.e you took out your current mortgage,
refinancing at a lower rate could lower your payments considerably.
" If you want to consider an adjustable rate mortgage. Adjustable-rate
mortgages (ARMs) offer lower interest rates at first, but the rate
is subject to change according to the fluctuations of prime interest
rates. If you are comfortable with the interest rate changes of
an ARM, it could save you money.
" If you intend to stay in your present home for three years
or less, an ARM could be very beneficial in terms of interest rates.
" If you have an investment property in which your Inc.ome stream
can be adjusted to accommodate changes in your interest rate, an
ARM could work for you.
" If a recent change in your financial situation has made it
possible for you to make larger monthly payments, you might want
to refinance your mortgage with a shorter term in order to build
equity. The higher payments will let you pay off your home more
quickly and save substantially interest charges over the long term.
" If you need to reduce your monthly payments. Refinancing
for a longer term will lower the amount you have to pay each month.
" If you want to take cash out of your home equity. You may
want to take out a new mortgage, in order to turn some of your home
equity into cash for a major expense such as home improvement or
college tuition. The advantage of taking out a loan secured by your
home is that you can get a lower rate of interest than you can with
an unsecured loan or credit card.
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