As interest rates adjust upwards, many homeowners who purchased their homes with initially-low adjustable-rate mortgages are struggling to pay the increased payments. Lots of these troubled homeowners are looking for a way out. Some try to sell the house, but that, too, doesn't bode very well in the current market. For others, the best alternative is to refinance their mortgage with into a fixed-rate loan. Changing to a mortgage with a fixed interest rate will stop the cycle of unpredictability and give you a payment that will be consistent month after month.

While you may think that this kind of an option is something you'd want to jump at, don't jump just yet. Make sure you're making the right decision before you sign any new financing paperwork. It's a significant step, and should only be entered into carefully and responsibly.

First, you need to determine exactly what you want to gain from refinancing your mortgage. Is interest your largest issue? Is it an annoyance that you're not sure how to budget for a changing rate in the coming months, or is the major problem that the interest increases have booted your payments sky-high? If you can afford similar payments to what you have now, you may be able to refinance to a lower interest rate for a shorter-term loan where more of the payment will go toward the principal of the loan. If you need a lower monthly payment, you should probably look for a long-term loan.

You'll also need to know what other costs you'll have to pay in order to get your mortgage refinanced. There are often a new set of fees and finance charges, and they can be substantial. If you don’t have the cash on hand to pay these fees, you're going to have to roll the amount into your refinanced loan. That itself can increase the monthly payments and negate any advantage that refinancing might have afforded you.

When seeking refinancing, don't just blindly go with the first lender that seems to have a great offer. Even in today's down market, there are still scores of lenders out there and they're all competing fiercely. Make a list of the best offers you come across and pick the top few that are most attractive and beneficial to you. Then, contact your top choices and see if they will approve you for a loan. The rest of your financial situation will come into play at this point. The better your credit score, the more chance you'll have of being approved for an offer you really like.

For many homeowners, a mortgage refinance can be a way of escape from the clutches of an adjustable-rate mortgage that's spiraling out of control, but only as long as it's entered into thoughtfully, carefully and with sufficient long-range planning. If you're considering traveling this financial avenue, check, re-check and even check again, if necessary, your financial needs and goals to ensure that you're signing up for a deal that's best for you.

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