Lower Your Monthly Payments – Refinance Your Mortgage Loan
One way you can typically lower your monthly payment is by refinancing into a shorter term loan. For instance, if you currently have a 30 year fixed mortgage, you may get lower monthly payments by switching to an adjustable rate mortgage.
Factor in the costs of the loan. Weigh the cost of refinancing verse your new monthly payment.
Cash out refinancing can lower your total bills if you are paying off high interest mortgages and/or credit cards. Other debt can often become tax deductible when refinanced into your mortgage. Check with your tax advisor.
Your monthly payments are typically lower with interest only or negative amortization loans. Beware if you enter into either type of loan with a high loan to value ratio to avoid going upside down on your home if the market drops.
Prepayment penalties can help to keep payments down. They are usually only available on Alt-A, subprime or hard money products.
If you are in a high interest loan and want to keep your property, you can refinance your home to try and get a lower interest rate. Keep in mind the total revenue savings may be compromised if you are paying off a prepay or entering into an adjustable mortgage like a negative amortization loan which has the potential to cost you more in the long run.
You can also sell your home to get out of a high payment.
Another option is to take cash out of your home to consolidate other debts. The consolidation might create enough savings and tax write offs to make your total monthly payments more affordable.
The type of loan you choose is determined by a number of factors. Fixed rate loans provide more stability with typically higher rates. Adjustable rate mortgages (ARMs) are fixed for a shorter period of time and can be adjustable on a monthly basis or up to ten years.
If you know you will be refinancing, pulling cash out and/or selling your property within a certain period of time, it is usually to your advantage to take an adjustable rate mortgage for the time you plan to keep everything the same.
The market is in a constant state of fluctuation. Occasionally longer term mortgages will have better rates than shorter terms. Always get quotes on different products prior to making your final decision.
You can often find mortgage calculators on mortgage company websites if you do not have one.
Mortgage calculators compute your mortgage payment based on principal and interest payment or interest only payment, the loan amount, interest rate and the amortization term (ie 30 years, 20 years, 15 years).
Many mortgage websites also have amortization schedules. These schedules show how much of your principal balance is paid verse interest during each payment. Viewing this schedule can help you make a decision between a principal and interest payment verse an interest only loan.
When calculating what your monthly payment will be, do not forget to add in the extra costs of homeownership like property tax, homeowners insurance and/or HOA dues, mortgage insurance (if applicable), renovation and maintenance expenses and loan costs.
Lower Your Monthly Payments – Refinance Your Mortgage Loan