Refinancing is becoming a hot topic these days with the rising interest rates, sluggish housing markets and increased number of foreclosures.  If you’re thinking about a refinance, here’s a few things to consider:

-Why do it?  Well for a couple of reasons.  You may have a variable interest rate loan and be concerned that your rate will raise your payments higher than you can afford to make.  Another reason would be to use the home equity to pay off outstanding debts like credit cards or student loans.

-Is it worth it?  Well, if you plan on moving out of your home in the next year or two, probably not.  You’re more likely to lose money in those instances.  But if you’re planning on lengthy stay, the money you’ll save will compensate for any closing costs.

-Shop around for rates.  Check with different banks and lenders, asking about their rates and terms.  Also ask your current lender about their rates and terms.  They already have business with you and would like to keep it, so they are very likely to offer you favorable terms, especially if you let them know you’re shopping elsewhere too.  Sneaky, but effective.  With the housing markets slowing down, competition for new loans is keen and the lenders know it.

Most important for you to know is that nothing is final until you sign on the dotted line.  Do your research and make an informed decision.

It never fails.  Almost before you can put the key into the door of your new home, you get bombarded with offers of mortgage life insurance to pay off your debt should you meet an untimely demise.

Treat those offers like telemarketers or other junk mail.  Dispose of it immediately.

Most of those policies are exceptionally overpriced and they decrease in worth as you pay off your mortgage.  Certainly not worth the money you pay out, but insurance brokers know how to prey on the fears of the worst to sell you on these plans.

Instead of mortgage life insurance, your better option is to take out a regular life insurance policy that will not only meet the costs of your obligations, but allow your grieving family an income to live on while they cope with their loss.

Weighing your debt basically consists of figuring out what the average rate is you are paying.  This works great if you have a primary mortgage plus a HELOC (Home Equity Line of Credit) or a secondary mortgage. 

The first step is to add up your debt.  For example, you have a $200,000 primary mortgage at 5.875% and a HELOC with a balance of $100,000 with a rate of 7.25%.  Your total debt is $300,000.

The next step is to divide your primary mortgage of $200,000 by your total debt of $300,000.  This will produce .67, which you will then multiply by your primary mortgage rate of 5.875% which equals 3.94%.

The third step is to do the same process with your HELOC.  Divide $100,000 by $300,000 which will produce .33.  Multiply .33 by 7.25 and you get 2.39%.

Now, you will add  2.39 plus 3.94 and you get 6.33.  So, you are paying an average of 6.33% on both mortgages.

With the rise in interest rates, foreclosures are estimated to reach some 500,000 this year.  Money might be somewhat time, so now’s the time to act not later.  Avoid becoming a statistic.  Take what action you can to avoid the F word.  If you’re struggling to pay your mortgage, call your lender and ask for suggestions how you can preserve your home and still satisfy your obligations.  Take a good look at your bills; if there’s anything you can trim back, do so.  Honestly assess your outflow versus your income and decide if you may need to sell and downsize.  The trick here is to act early before the deluge of phone calls asking for payments strikes, or worse, foreclosure on your loan.  With a touch of preventative action, it can be avoided.