Maybe you just lost your job. Perhaps you just had a baby. Or,maybe
you’re planning your wedding. No matter the reason, any time your
lifestyle changes is an opportunity to evaluate your home loan, to help you reduce your expenses and maximize the money in your pocket.
Major Illness or Job Loss
If a pink slip or a major illness knocks you out of work for a few
months, you may panic as you wonder how you’re going to make ends meet.
Fortunately, there are ways to rearrange your mortgage to make the
situation work for you.
Your first step may be to refinance. Use a mortgage calculator
to see how much you could save by refinancing to a loan with a lower
interest rate; mortgage rates are currently near historic lows, meaning
now is a great time to shop around. Depending on your current interest
rate, a refinance could save you hundreds of dollars a month in mortgage
payments.
If that’s not enough, you may consider a forbearance. This option
allows you to halt your mortgage payments, typically between six and
twelve months, until your financial situation is less dire; then, you’ll
have another six to twelve months to repay the interest and principal
payments that accumulated while you were out of work. Most lenders will
only offer a forbearance to borrowers who can prove their financial
hardship is temporary, typically lasting six months or less.
Here Comes the Bride
If wedding bells are in the future, it’s a great time to look at your
mortgage using a home loan calculator. Marriage means not only joining
your lives, but your finances as well. If you’re in the market for a new
home, adding in a second person to your family – and a second income –
can increase the amount you may qualify for. If your partner has a
strong credit score, he or she may also help you qualify for a lower
interest rate based upon it.
You may be tempted to draw money out of your property to pay for your
wedding through a cash-out refinance. This is where you liquidate some
of the equity in your home to pay for expenses. If at all possible,
resist the urge. For one thing, a wedding is a day, while your home is
your shelter for months, maybe even years, down the road; reducing your
financial stake in your home to pay for a one-day party is putting the
cart before the horse. If you need more convincing, you should know that
withdrawing some of your home’s equity will lead to higher mortgage
payments, since you’ll have a higher principal to pay down on the loan.
And Baby Makes Three!
If your major lifestyle change involves starting a family, you’ve likely already started evaluating everything
in your world, whether it’s the arrangement of furniture in a
previously unused bedroom (where will the crib go?) to when – or if –
you’ll return to work after the baby’s born. Spending some time with a
mortgage calculator should be on your list, too.
Although the U.S. Government does not offer paid maternity leave to new parents, you can take advantage of the Family Medical Leave Act, or FMLA, which guarantees new moms and dads up to 12 weeks of leave – unpaid
leave. To bridge the gap in finances during that period, consider
refinancing your mortgage to a lower rate. Not only could you save
hundreds of dollars a month, depending on your current interest rate,
but you may also be able to “skip” a mortgage payment while you
refinance from one loan to another.
One thing to consider here: my husband and I refinanced right after
the birth of our first child. Shortly thereafter, we discovered that our
previously-roomy house wasn’t big enough for our growing family.
However, the refinance had really locked us in to staying in our home
for the foreseeable future. In other words, the birth of a child may not
be the best time to make dramatic changes to your mortgage situation.
source: everythingfinanceblog.com
