Lower Monthly Payments

There are two ways to decrease the mortgage amount per month:

1. Refinance to extend the term of your loan.

By extending the term, you spread out the mortgage over more months and thereby reduce the monthly cost, even if rates are the same. Remember that overall interest will be greater.

2. Refinance from a fixed-rate loan to an ARM.

As the names suggest, the fixed-rate loan will not vary with the market rate index, as the ARM does annually. Even if the ARM rate falls lower than the fixed-rate for a short time, it is likely to cost you more over the life of the loan if you plan to stay in your home for a long time.