If you need or want to lower your monthly mortgage payment, you have several options. They are largely all refinancing based, but may work differently and work out differently in the long term. There are risks and benefits to lowering your house payments and you should carefully assess any refinancing terms when you consider the possibilities.
Refinancing an adjustable rate mortgage is currently quite doable if your credit is good. You may also find that there are a number of programs available to help homeowners struggling with ARMs. A fixed rate mortgage can protect you from the adjustments that can come with changes in the interest rate and economy. If your credit has improved, you may qualify for a better fixed rate than you could have when you bought your home. Refinancing does mean some closing costs, so do the math and make sure you will save.
You may also want to consider refinancing to extend the term of your loan. While opting for a fixed rate mortgage can help you save over an adjustable rate mortgage, extending the term of your loan will add a substantial amount to the total cost of your home loan. It can, however, save you a substantial amount on your monthly payments. If you add five years to a fifteen year mortgage, you may find yourself paying an additional $20,000 or more in interest over the term of the loan.
If you can lower your interest rate by refinancing, the savings can be substantial. This option may lower both your monthly mortgage and the overall cost of your loan. If you have improved credit, you may qualify even in today’s challenging market for a better mortgage rate.
Finally, you might also be able to lower your monthly payments without refinancing your home loan. If you are paying PMI, investigate whether you still need to. You may find that if your home has increased in value, you are no longer required to carry this insurance. Reducing your homeowners insurance expense may also lower your total cost each month and help you save a bit, if the premiums are rolled into your monthly home loan payments.
When considering refinancing, be sure to shop around. Choose a reputable bank and read current information on bank stability before borrowing. You may find that it is more cost effective to maintain your mortgage and cut expenses and costs elsewhere in your budget.