Wednesday, January 23, 2008

Reduce Your Monthly Payment By Mortgage Refinancing

Reduce Your Monthly Payment By Mortgage Refinancing by Joe Kenny

If you are feeling the pinch of not having enough money each month, you might be able to reduce your monthly mortgage payment by refinancing. It could reduce your payment and allow you to enjoy greater financial liberty - once again. If you have an adjustable rate mortgage, and you find your rates going up - or you are waiting for them to do so, you can also benefit by refinancing and getting a more stable mortgage. Here are some of the details.

Adjustable rate mortgages, not long ago, were one way that people could get a larger house because the payments started out low. They stayed low for a while, and everyone who had them hoped that their income would increase by the time the interest rate became adjustable. Well - it sounded good at the time. Many of you, however, know that it just did not happen for everyone. Many were left with ever increasing payments.

Refinancing this type of mortgage, or any type, could reduce your monthly payments simply by giving your better terms. You do have to wait, though, for the interest rates to drop, or grab a new deal before they get much higher. Getting a better deal means that you need to see the interest rates drop at least one full per cent less than what you have now.

Another way to reduce your monthly payment - even if the interest rates do not drop, is to stretch out the time for repayment. Longer terms are available, including 40 and 50- year mortgages. If you can avoid these mortgages, though, you should. By stretching out the time, you add interest to it - quite a bit of interest. While it will lower your payment each month, it does increase your overall indebtedness.

The type of loan you want to get would be a fixed rate mortgage. Typically these do have a higher monthly payment than an adjustable rate mortgage, but by adding time, this becomes your mortgage of choice. It has no future surprises. Your payments will always be the same, and your payments are fully amortizing.

It may also be possible that you had obtained your last mortgage with a less than excellent credit rating. This could have given you an increase in the interest rate you received. If that is the case, and your credit could stand some improvement, or has improved since that time, you could get a better interest rate just on that fact. Start out by getting a copy of your credit report and making sure that it is correct. An error here could put you back into a higher interest rate. Take some time to raise your credit score further and reduce some of your other indebtedness. Then apply for a much better deal.

You will need to get several mortgage refinance quotes in order to get the best deal. Compare them carefully by paying special attention to the fees, and the closing costs. To reduce the interest rate even more, you might want to consider buying points. Stay away, though, from any mortgage that includes a prepayment penalty.

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