Managing Your Monthly Mortgage Payment

When you first started shopping for a house and a mortgage, chances are you went through some kind of budgeting exercise to determine how much you could afford. Starting with a monthly payment you could make, you may even have used a mortgage calculator to see how much of a loan this would translate to at prevailing interest rates.

In any case, imagine that you are starting over with your mortgage. Figure out what kind of payment you could reliably make, and use a refinance calculator to test how much of your mortgage balance this monthly payment would finance at current interest rates and/or over different time periods.

Options for Fitting Your Mortgage into Your Budget

By using a refinance calculator in this way, you may find it possible to fit your mortgage back into your budget -- or at least, to make a new mortgage fit. Here are some possible ways to fit a new mortgage into your budget:

• Refinance at a lower interest rate. Mortgage rates have dropped, meaning many homeowners have an opportunity to refinance at a lower rate. A refinance calculator will show you how much this could save you.
• Refinance for a longer time period. If you've been paying down a thirty-year mortgage for a few years, refinancing to a fresh thirty-year mortgage will lower your payments by spreading your remaining balance over a longer period. This costs money in the long run because you will be paying interest for more years, but may be the best way to make your mortgage fit your budget.
• Switch to a fixed-rate mortgage. If you want to make sure your monthly payment stays within your budget, locking in today's relatively low interest rates by refinancing to a fixed-rate mortgage is the way to do it.
  

When Increasing Payments Makes Sense

On the other hand, if your income has grown considerably since you originated your mortgage, you might consider refinancing to a shorter period. You'll want to make sure you can do this and still leave a financial cushion, but if you can, this strategy should save you interest expense over the life of the mortgage. Contact a trusted mortgage lender and see what you can save.