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Coping with rising mortgage payments

If you are one of the millions of people who got an adjustable rate mortgage over the past three to fiver years, chances are that you are now feeling the affects of the rising interest rates. The article, “How to cope with rising mortgage payments,” written by Pat Curry, columnist for Interest.com, offers some helpful suggestions of ways to cope with the rising monthly payments.

Curry urges everyone dealing with the dilemma of rising monthly payments, to pay the mortgage first. Your mortgage payment is the most important bill and will affect other finances if payment is missed.

The reason payments are up is because most people got these adjustable rate mortgages when rates were at an all-time low. They had no place to go, but up. This does not mean that adjustable rate mortgages are bad; people who sign for one today may experience a decrease in monthly payments over the course of a year or two.

So what do you do if your payment has increased by $100 per month? “Consider yourself lucky. That’s less than $3.25 a day—the cost of a grande latte at Starbucks and less than renting a single movie at Blockbuster. You should be able to meet your higher mortgage payment without a lot of sacrifice.”

Curry offers tips of saving that $100 per month. Bring lunch to work instead of buying it everyday. If you do not always use your premium movie channels, you should consider having them removed. You can also sell no longer used items, such as compact discs, on the Internet.

If your payment has increased by $200 per month, you can try to work overtime once a week at your job. Since some jobs do not allow overtime, you can try to pick up a second job to work a couple of nights per week. Maybe try delivering the morning newspaper or offer to tutor at a local school. There are many ways to “make ends meet.”

Now, if your payment has increased by $300 per month, you should definitely consider refinancing. Depending on how long you plan on staying at you home, you have short-term and long-term options.

For short-term options, there are interest-only loans that do not require you to pay any principal over the first few years. You could also take out another adjustable rate mortgage. Your rate will be higher than your original loan, but not as high as you are currently paying. There are many special introductory rates you could cash in on.

For long-term options you should look into a fixed-rate mortgage. “A 30-year loan is averaging about 6.7 percent . . . But it could still be less than your adjustable rate mortgage is charging and you won’t have to worry about another reset, even higher monthly payments, each year.”

Unfortunately, if your payment has increased by $400 or more, you really only have one option; sell your house. You probably could not afford the payments when you originally signed for the loan and now you are trapped.

There are some helpful money saving tips for small interest rate increases. Large monthly payment increases, however, cannot be fixed by bringing lunch to work.

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