Monday, July 28, 2008

WHAT ABOUT MORTGAGE PAYMENTS

Even though your mortgage loan may be a 30 year term, not many of us stay with the same loan for that many years. On average we Americans refinance our homes every four years. Paying off your present mortgage and taking out a new one can mean big savings over several years. It’s important to consider both the costs and benefits before making your decision, because refinancing comes with a price in the short term.Why some people consider refinancing their mortgageWhen you want to save money. Say you have a fixed rate mortgage from several years ago and interest rates have since dropped, refinancing may lower your payments considerably. If you have a $150,000 mortgage with a 30-year term and a rate of 8%, the monthly now would be around $1,100; while the same mortgage at 6% will have a monthly payment of less than $900 a month.When the borrower wants to switch to a fixed or adjustable rate mortgage. Adjustable rate mortgages (ARMs) offer lower interest rates initially, but some borrowers find the fluctuations stressful. If the lending rate is on the way up, you may consider locking a fixed rate and consistent monthly payments. Conversely, if you want to reduce your monthly payments and are okay with the interest rate, then you may want the switch to an (ARM), it could save you money with the refinance.When you want to reduce monthly payments. Refinancing for a longer period will lower the amount of you monthly loan payments. You will end up paying more in interest charges over the life of the loan, but if you’re having difficulty making current payments, this could provide some relief.When you want to turn home equity into cash. Your may want to fund a major expense; therefore, you could take out a new mortgage with a larger principal, in order to turn some of your home equity into cash. This is cash-out refinancing. In this case you can get a lower rate of interest than you could with an unsecured loan or credit card. However, if the interest rate offered for your refinanced mortgage is higher than your current rate, then a home equity loan or line or credit might be a better choice.We need to remember when refinancing in order to pay less interest; you won’t see the savings right away. Lenders usually charge fees when you take out a new mortgage, you will also have to pay a penalty for getting out of the old one. You need to understand your reasons for refinancing. This way you can determine what is the best financial path for you in your future.As always research, start with the internet search, investigate mortgage loan tips andhome buyer defense guide for starters. Do what you need to become an informed borrower.
As always,

Happy Surfing,