Refinancing To Fixed Mortgage Rate

by Barb
(Kansas City, KS, USA)

Regarding refinancing to a fixed rate mortgage: Kate, I have a adjustable loan at 4.5% on my house. Have been in the house for 5 years. Bought house for 125 thousand. House appraised at around 160 thousand.

House payments have gone from $836 per month to $910 per month. The monthly payment includes yearly taxes and insurance on the house. Taxes run around $2,400.00 a year.

I asked my lender to give me figures for refinancing the house on the current balance of 92 thousand in order to change it from an adjustable loan to a fixed rate loan.

They sent me the info and said they could do a fixed rate for 5% and a monthly payment of $438.00.

Here is the rub. The info stated the payment was in the principal and interest only. I called to ask if it was set up like the current loan, (covering taxes and insurance), exactly what would that bring it up to. She said it would end up being a monthly payment of somewhere close to $938.00.

Bottom line is that the whole point of refinancing was to not only lock-in a fixed mortgage rate but to get a lower monthly payment. I am not coming out ahead with the deal they are offering.

So the question is... Am I stuck with an adjustable mortgage rate loan as is, or can I actually get a fixed mortgage rate loan that lowers my monthly payments AND covers yearly taxes and insurance? If I set aside my own tax money monthly, I would be paying a couple hundred a month, (and that does not even include what it would cost me to pay for my home insurance out of pocket). Either way I don't really come out ahead.

I was a little ticked at them for not telling me up front when I talked to them that the tax and insurance was not included, (as in the current loan), in their original quote over the phone.

Is there a better way?

Kate Answers: Refinancing To Fixed Mortgage Rate

Dear Barb, Yes, I am sure the news that your payment would be increasing, not decreasing was disappointing.

Two thoughts for you, Barb:

1) If you know how long you intend to stay in this house, perhaps a hybrid mortgage that begins as a fixed mortgage rate would suffice. Check out how I describe a Hybrid to see what you think.

I will warn you though that the fixed rate period may not carry a mortgage rate any lower than say a 30 year fixed rate mortgage due to the present economic environment.

At the bottom of the page, I have included links to pages on my website that describe different fixed rates. Look them over to see if any of these fixed mortgage options would be applicable to your situation.

2) To make sure this never happens again, I have provided a home mortgage payment calculator on my website. No need for you to input personal information. It is free and believe me, easy to use! Take charge and prevent future unpleasant surprises.

Go to Mortgage Rate Calculators so you do not have to depend on a lender to calculate examples of monthly house payments.

Will you please let me know if you have more questions?

Take a moment to bookmark this page to your favorites and visit often for more tips on refinancing to a fixed mortgage rate. You can also invite friends to comment on this page or ask a question of their own like you did.

Best Wishes,




P.S. Go to my Best Mortgage Rate Blog, an entertaining source of mortgage information. Subscribe now to the RSS feed.

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