May 4th, 2016 5:36 AM by Jackie A. Graves, President
you have a mortgage, the monthly payments will probably change sometime during
the term of the loan. There are two main reasons for the payment amounts to
interest rate on an adjustable-rate mortgage doesn't necessarily change every
year. When it does change, the rate changes near the anniversary of the date
that the loan was closed.
types of mortgages -- adjustable-rate and fixed-rate -- are affected by changes
in taxes, insurance premiums and other fees. Those changes tend to kick in
toward year's end, when the mortgage servicer performs an escrow analysis.
mortgage borrowers experience the greatest volatility because they pay interest
at rates that fluctuate with market changes. When the index rate rises, it can
send your monthly payment skyrocketing.
interest rates start to climb, prepare yourself by setting aside the extra $50
to $75 per month you saved by avoiding a fixed-rate mortgage. The more time you
have before a likely rate adjustment, the more money you can stash to cushion
also may want to try prepaying as a way to lessen the impact of an expected
rate increase. One of the advantages of an ARM is that prepayments can reduce
your monthly payments, which are recalculated each year along with rates. As
long as an ARM customer prepays at least 45 days prior to an adjustment date,
the lender will use the reduced balance figure to establish next year's
payment, thus softening the impact of concurrent rate increases.
mortgage customers enjoy relatively stable monthly payments, but they have
fewer options when changes occur. For instance, prepaying on a fixed-rate
mortgage can reduce your balance, loan terms and overall interest bill, but it
has no effect on your monthly payment.
way you can reduce your monthly payment is by ridding yourself of mortgage
insurance. Once you have met your lender's requirements, you could save
anywhere from a few bucks to more than $100 per month by dropping mortgage
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