Lower Your Mortgage Payments When You Refinance

Refinancing a home mortgage is something that people decide to do for various reasons. The decision to refinance a mortgage might be related to current financial troubles or it might be because you wish to borrow money against the equity you have built up in your home in order to make home repairs or to start a new business. However the most common reason that individuals decide to refinance a home loan is in order to obtain a lower monthly payment.

If your monthly payment is causing you some grief and you have decided that refinancing a mortgage loan is in your best interests then read on for two important suggestions to get those lower monthly mortgage payments that you desire.

By extending the terms of your mortgage after refinancing, you can stretch it over a longer period of time. This will lower your monthly payments for sure. Take this example- if you bought a home five years ago that cost $300,000 and it was at a seven percent interest rate, you might decide to refinance the mortgage once your balance is $280,000. This would make your monthly payments $1,200.

But there is a better way to refinance a 2nd mortgage. Here is how- if you took the same home and refinanced at a 6.5% interest rate over a period of 40 years this would lower your monthly payments to $850. You would save yourself $350 a month. The downside to refinancing mortgage this way is that by taking longer to pay off your home you will actually pay more money to the mortgage lender. You must decide what is more important to you, the money you pay in the short-term or the money you pay in the long-term.

In the short-term if you choose to refinance your mortgage you might want to go with an adjustable rate mortgage. If you anticipate selling the house in a few years or expect your income to go up, then look at the option of a hybrid adjustable rate mortgage (ARM). This option for refinancing a home loan means that you will be at a fixed rate for as long a span of time as five years before the point at which the mortgage lender makes the necessary adjustment to the mortgage rate. This refinance mortgage option is attractive to many people because they can enjoy the positive side of having a lower adjustable rate loan and still have a cushion when financially the economy, and their own situation is unsteady.