Mortgage Refinance Basics

You originally took out your mortgage with high hopes. But here we are a few years later and things are not going well for you. Your monthly payment is way too high, that fixed rate mortgage is currently sitting much higher then the adjustable rate mortgage index, and maybe you foolishly chose an interest only mortgage. It is not easy to predict the future but that is almost what you have to do when choosing your original mortgage. Luckily there is way to fix your mistakes.

When you refinance a mortgage you are basically extending the length of your mortgage in return for a lower monthly payment. Mortgage refinance interest rates are lower then normal mortgage interest rates, which will also help you save money. Here is an example:

If you took out a $200,000 mortgage for 30 years with a fixed interest rate of 7% your current monthly payment would be $1,330.60 a month. If, after 5 years, you refinanced your mortgage for 30 years at a 6% interest rate you would only be paying $1,128.73 a month. That is a savings of $201.87 a month. The savings can be higher or lower based on your current mortgage, but an extra $200 a month would be really nice to have. It can also help you pay off some of the other debts you may have.