mortgage tips

Expert mortgage tips to guide you with your money.

Save Each Month – Refinance Your Mortgage

Life seems to come down to monthly payments. If you are struggling to meet your monthly payments on your mortgage, maybe you need to consider refinancing. If you can get a lower interest rate by refinancing, you'll be able to reduce your monthly payment. The key is to consider the future. Don't switch to an incredibly low interest 3 year ARM unless you plan to sell your home or refinance again. Choose a refinance plan that’s right for you and you'll save money and maintain your security.

Refinance Your High Interest Mortgage

If you have owned your home for years - and you bought it before the interest rates hit rock bottom - you have many available that can help you save more money. For instance, a simple refinance at a lower interest rate will save you money each month. Further, depending on how much equity you have in your home, if you refinance at a lower rate and continue to make the same payments, you can pay off your home in a much shorter timeframe. Additionally, you could refinance into a 15 year mortgage that may have a shorter term, but still has a lower interest rate. With your payments almost the same, you pay your home off sooner. You could also take some money out of the equity and put an addition on your house or complete major repairs or remodeling. The first step is to obtain your current mortgage information and compare it to the refinance rates available today. Don't miss a chance to save some serious money!

Refinancing to Extend Your Term

A mortgage is basically like a huge house-sized savings account. The "savings" is your equity, which is the appreciation of the value of your home and the amount of principal you have paid of your mortgage. The remainder of the mortgage is paying interest to the bank for loaning you the money. Mortgage math is actually quite simple. If you took out a 30 year fixed mortgage 10 years ago, you have paid money towards your interest and principal and your home has increased in value. If interest rates are lower than they were when you bought your home, you can refinance and borrow less than when you first bought your home, at a lower interest rate, spread out over more time. Your monthly payment is likely to drop substantially. Depending on your financial situation, you may also want to refinance into a shorter term loan so you can pay off your home more quickly. Review all of your mortgage refinance options before making a decision.

Why Refinance Now?

Why go to the trouble of refinancing your home mortgage? The possible answers are many, but there are three major reasons.

  1. Lower Interest Rates - If you can pay less to borrow money, you will save money. If the current interest rates are lower than when you bought your home, a refinance is a smart financial move.
  2. Real Estate Value - All over the United States, home values are increasing. Many people are taking advantage of this to improve on their home or pay off old debts. If you take advantage of your home equity without making a drastic change to your monthly payment, you’ll be able to use that equity for home improvements.
  3. Flexibility - Banks today have so many different opportunities from interest-only mortgages, 3 or 5 year ARM's and fixed rate mortgages so you can find one that fit your lifestyle and budget.

Fixed or ARM

Refinancing is very popular, especially since interest rates have been low. There are several refinancing options from which you can choose. For instance you select a fixed rate or an adjustable rate mortgage. A fixed rate mortgage has an interest rate that will stay the same for the duration of the loan and will usually be for a term of 15 or 30 years. An adjustable rate mortgage (ARM) can change (usually increasing) after a particular term, usually 3 or 5 years. If you don't plan on staying in your home forever, a 5 year ARM or a 3 year ARM can be a great choice for you.

Cash Out Refinancing for Home Improvements

If you have equity built up in your home, you may want to improve your existing home rather than moving into another one. If you decide to improve your home, you can easily refinance and get back money to add a bathroom, a bedroom or upgrade your septic system. Banks and mortgage companies sometimes offer special incentives for equity loans that will be used for home improvements. In some cases they even have special loan programs for higher amounts. You can find great refinance options that will give you the means to improve your home and you'll be building your equity even as you take cash out.

Refinancing a Home Loan with an Interest Only Option

Some homeowners find this program very handy and flexible, and depending on the current situation. An interest-only refinance might be a solid choice. The program is just as it sounds - you are only required to pay payments towards your interest each month. This reduces the payment significantly. You can put money towards your principal when you want by paying a larger payment. Some buyers have used this option to get into a home that would otherwise be beyond their means. This option can be risky, but it can be worth the risk for the flexibility. A mortgage broker or mortgage web site can advise you if this kind of plan is right for you. There are pros and cons to every refinance option. Learn your options before choosing.