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Facing A Major Increase in Your Mortgage Payment? It

Facing A Major Increase in Your Mortgage Payment? It May Be Time To Refinance

Many of us are facing increasing mortgage payments in the months and years ahead because of adjustable rate mortgages (ARM) that are beginning to adjust. For some people, their average payment can jump as much as 100% — from 600 per month to over 1,200 a month. Unfortunately, it can often be hard to deal with these sudden jumps in monthly mortgage payments. If you find yourself in this situation it may be time to take a serious look at refinancing your mortgage to ensure that you are able to keep the house you are in without having to worry about increasing payments.

No doubt, for some people, often those who plan to live in the house they are in for five years or less, adjustable rate mortgages have their benefits. Payments are often lower up front for the first few years and then adjust later in the life of the loan. Unfortunately, some people decide they want to stay in their house for longer periods of time, or they may be facing a tough market where they just cannot sell their home. For these people, ARM’s become a major financial drain. Refinancing is often the answer that most of these folks need in order to lock in a low interest rate and have manageable monthly payments with no surprises.

Many people who refinance their mortgage often find out that they can lower their monthly payment while at the same time saving thousands of pounds in interest over the life of the loan. If you have a 200,000 house and refinance to shave 1% off your interest rate you could potentially save upwards of 15,000 over the life of the loan. That is a considerable chunk of money that can be put to better use – such as setting up a college education fund for your children or performing a remodel of part of your home.
Of course, the best benefit of refinancing your mortgage is that you can turn your ARM into a traditional mortgage with a set interest rate for the life of loan with fixed monthly payments. Of course, nothing stays the same for long, so you may very well find out that in a few years you are refinancing again to take advantage of another drop in interest payments.

There are costs involved in refinancing – typically you will pay for a home inspection, document preparation fees, and other similar costs that parallel those you paid when you first closed on your home. It is important that you weigh the cost of a refinance against the total savings you will get from refinancing. Many people find that the benefits far outweigh the costs. Considering that they will be locking in your mortgage payment and, in many cases, lowering your interest rate, they don’t mind paying a little up front!

Refinancing can help you get your financial life back under control when facing uncertainty with your home mortgage payments. It’s the perfect tool to use for home owners of all backgrounds no matter how much they might owe on their home.

Adjustable Rate Mortgages Interest Rate Strategy

Over the last few years, many people squeezed into new homes using adjustable rate mortgages. With interest rates going up, you now need a new interest rate strategy

Adjustable Rate Mortgages ARMs

Adjustable rate mortgages carry a bit of a gamble for home owners. Essentially, you trade smaller interest rates and lower initial payments on the gamble rates will not increase over time. If rates stay low, you make out like a bandit. If rates increase, you need to consider your options to avoid getting stuck with a high interest rate loan and resulting cash flow problems from increased monthly mortgage payments.

For the last three or four years, adjustable rate mortgages have been offered with incredibly low interest rates. Many people used these low, low, low rates to buy homes that would otherwise be beyond their means. Starting in 2004, Federal Reserve Chairman Alan Greenspan started making noises about increasing money borrowing rates. He has followed through on these hints. Although mortgage rates arent tied directly to the Federal Reserve Bank, they are heavily influenced by it. As a result, many people are now facing tight finances.

Avoid Rising Rates

There are really only two solutions for avoiding the increase in interest rates on adjustable rate mortgages. The first strategy is to immediately convert to a fixed rate mortgage product. Fixed rates are still at historic lows when compared to rates offered over the last 50 years. By flipping to a fixed rate, you will be able to solidify your budget and finances since you will know exactly what you have to pay each month. If rates decrease in the future, you can always try to flip back to an adjustable mortgage loan.

Unfortunately, some home owners are simply going to have to face the fact they lost one the interest rate gamble. Typically, this will occur when you realize you simply cant afford to make the monthly payments required by getting a fixed rate loan. In such a situation, you are going to have to sell your home and downsize. In most situations, it is better to do this now since youve probably built up a sizeable chunk of equity over the last few years and want to avoid a loss of that equity as the market cools down. While this may sound like a disaster, it really isnt. Yes, you have to downsize, but you should still have built up a chunk of equity.

Interest rates are going up whether you want to acknowledge it or not. The time to deal with your adjustable rate mortgage is now, not when you straining to make payments.