| Negotiation, communication can forestall foreclosures
Joseph Ripplinger is a man on the verge of losing his house. A semi-retired handyman at 66, Ripplinger has turned several times to the equity in his stucco bungalow in south Minneapolis to pay medical and credit-card bills. He and his wife, Marlys, a newspaper carrier and part-time nursery clerk, bought the house in 1975 for $24,900 and raised their four children there. But it was the refinance he did last December that got him in trouble. Within days of signing the papers, Ripplinger began to realize he couldn't afford the terms of the $186,500 loan. They include an adjustable-rate mortgage (ARM) that -- as near as he can understand -- started at 1.75 percent and climbed to 8.625 percent by last month. He can't afford to refinance again. A prepayment penalty likely would cost him $6,000.
Refinancing: Don't Waste Time Wondering, Just Do It
If you're not changing the term of your loan ... even dropping your rate by an eighth makes sense because you did not have to change anything to get a loan," says Bob Walters, chief economist for Quicken Loans. "It always pays to get a lower rate." Say the current balance of your 6.5%, 30-year fixed mortgage is $250,000 and you are making monthly payments of $1,580. If you refinance into a loan of the same size that's one percentage point lower, 5.5%, you've dropped your monthly payments by about $160 to $1,420. But let's say you want to take out extra cash to pay off $20,000 in credit card debt: You'll need a new loan of $270,000. And even with that higher amount, your monthly payments are still reduced about $50 from your current payments to $1,533 a month. To determine how your monthly mortgage payments will differ under a new loan, use a mortgage-refinance calculator to determine the savings you might receive.
Busting money myths
The only way to determine whether a fund suits your ethical standpoint is to ask about its strategy. Will it invest in mining companies or commercial logging? In tobacco or arms companies? Refinancing Many people refinance their credit-card debts, personal loans and other expensive, unsecured debt on to their mortgage, believing it makes sense to wrap it all up in a single, lower-rate loan. This can be an expensive mistake if you don't keep finances under tight control. The problem is that although you may be able to halve your interest rate by switching your credit-card debts to your mortgage, you're likely to be lengthening the time it takes to pay the balance off -- and that will cost thousands extra. For example, Aussie Home Loans says a $10,000 credit-card balance switched to a mortgage at 8.57 per cent would increase mortgage payments by $81 a month.
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