Is It Time To Refinance Your Mortgage?

You've owned your home for four years and you are one year away from seeing your variable rate mortgage reach its first adjustment period. You are imagining that the 3.125% rate you currently have been paying will be higher, much higher in fact. Indeed, at current interest rates you could see your mortgage spike up to nearly 6% and your monthly payments surge by several hundred dollars per month. Yes it is time to refinance your mortgage because if you don't you can expect to pay through the nose in about one year's time.

Yes, consumers across America are in for a rude awakening: mortgages financed when rates were at or near historically low rates in 2001 and 2002 are now finding out that they are being socked with payments that are much higher than they were previously. Some are learning that they simply cannot afford to make payments putting their homes in jeopardy. Foreclosures are on the rise too as refinancing for them is not an option. How about you? Can you get refinancing?

Keep this in mind when refinancing: you may be able to switch over to a fixed rate mortgage but you may not be able to get such a loan if:

Your credit history is poor resulting in an outright loan rejection or being told that an 8% mortgage is all that is available to you.

Your new payments are beyond what your budget is. In other words, your debt to income ratio is too high. No one will refinance your loan if you fail to meet loan qualification amounts.

These two factors or variations of each can thwart refinancing like nothing else. One solution is to stretch your new mortgage back out to a full thirty years even if you have been paying your current mortgage for several years. Or, if you have cash available you could put some money down against the new mortgage.

Consider an FHA loan or VA loan if eligible; in addition, check with your state for special financing options available to homebuyers. Keep in mind that many of these programs may be available only to new homeowners, not refinancers.

In all likelihood if you are having difficulty even now making payments, then any increase later will be a big problem for you. In that case your only option is to put your home on the market and finding more suitable and affordable housing.