Is it time for your
mortgage check-up?

Are you paying too much for your mortgage? The average American refinances his or her mortgage every four years, because paying off your present mortgage and taking out a new one can translate into big savings over time. Make it your resolution to make sure your current mortgage is still the best loan for you.

Click here to inquire about a check-up and to let me help determine if refinancing is right for you.

1. Has your financial situation changed since you took out your mortgage?

If a change in your financial situation has made it possible for you to afford higher monthly payments, you may want to refinance your mortgage with a shorter term. The higher payments will enable you to pay off your home more quickly and save substantially on long-term interest charges. Or, if you are disciplined, you can opt not to refinance and simply pay more towards your principal each month.On the other hand, if you're having trouble making your mortgage payments, refinancing for a longer term can lower the amount you have to pay each month. You'll end up paying more in interest charges over the life of your loan, but having more cash on hand may spell relief and help you avoid costly credit card debt.In addition, if you were required to take out private mortgage insurance (PMI) when you bought your home because your down payment was less than 20 percent of the purchase price, you may be able to cancel PMI if your equity has grown to more than 20 percent of the value of your home.

2. Do you have an adjustable rate mortgage?

Many borrowers who took out adjustable rate mortgages (ARM) in the past few years are now facing a jump in payments as their mortgages reset for the first time. If your payment is set to increase, consider refinancing your ARM with a different loan product.For example, suppose you have a $200,000 mortgage that is a 5/1 ARM with an introductory interest rate of 4 percent. Your current monthly payment would be $954.83. At reset, suppose your new, fully indexed rate is 7.5 percent. Your new monthly payment would be $1336.80. Under this scenario, your monthly payment would increase by $382.To avoid a big jump in payments, you can refinance your ARM into either a fixed-rate loan or another adjustable rate mortgage. If you plan to stay in your home another 7 or 10 years, and you expect rates to stay the same or increase, consider refinancing to a fixed rate mortgage. If, however, you plan to stay in your home just 5 to 7 years, and expect rates to fall, refinancing to a hybrid ARM may work better.You can also look into improving the features of your ARM. Mortgages with adjustable rates have protective caps that limit how much your payments can increase in any given year and over the full term of the loan. You may be able to negotiate more favorable features if you refinance your current ARM.

3. Do you need cash for a large purchase, such as a car, or to pay for education?

If you've built up equity in your home, you can turn some of that equity into cash for a major expense. There are two ways to access that money: cash-out refinancing and a home equity loan.The advantage of using cash-out refinancing is that your new mortgage payment may be lower than the combined payments of a separate home equity loan and first mortgage. However, the up-front costs associated with cash-out refinancing can negate any savings over a home equity loan, so make sure you investigate both options.Borrowing against your home is generally cheaper than using credit cards or unsecured consumer loans because they carry lower interest rates. Using your home equity as security reduces the risk of a loss for the bank. In addition, the interest on the loans may be tax deductible (check with a tax advisor about your situation).

4. Are interest rates lower now than when you took out your current mortgage?

If you took out a fixed-rate mortgage several years ago and interest rates have since dropped, refinancing may lower your payments considerably. A $150,000 mortgage with a 30-year term and a rate of 8 percent, for example, carries a monthly payment of $1,100. The same mortgage at 6 percent will have a payment of less than $900 a month.

5. Are you considering moving?

It makes sense to review your mortgage even if you're planning to move in the next year. Knowing how much principal is left on your loan can help you determine how much equity you have, which you can use as a down payment on a new home.