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5: Make Your Housing Plan — Own

Managing Your Mortgage

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When you own your home, you have choices about how to manage this important asset. Some potential choices you might face as a mortgage holder include:

Refinancing Your Mortgage

Refinancing your mortgage makes sense when interest rates fall or if you need a more affordable monthly payment. But there are scammers out there who will take advantage of your need. 

Watch for:

  • Solicitations with “limited time” offers.
  • Advertisements that falsely claim to be government-sponsored.
  • Online sites that request your personal information or upfront fees.

Prepaying Your Mortgage

When you can afford to do it, making an extra payment to the principal on your mortgage can help. Even a small amount like $25 extra each month can save you thousands of dollars in interest payments over the life of the loan. But keep in mind that prepaying may not benefit you if you have a low interest rate but are in a high income bracket since you lose the tax deductions on the interest you pay. In addition, consider the next best use for the money used to make principal prepayments. Perhaps it can be invested to earn a higher return than the interest rate on your mortgage.

SAM tips offers several programs and resources for helping you find ways to refinance your home. Also make sure you know what your loan states with respect to prepayment penalties.

Taking Out Home Equity Credit Lines

Sometimes an upgrade or repair to your home may require that you take out a home equity line of credit (HELOC). This kind of borrowing is secured by the equity in your home, so it is wise to consider these cautions:

  1. If there is a housing market slump, you could end up owing more on your mortgage and HELOC than your property is worth. 
  2. Do not take a HELOC to pay off credit card debt. If you find yourself in this situation, it would be wise to speak with a reputable credit counselor who can help you work out payment terms with your creditors rather than risk your home. 
  3. If you fail to make your HELOC payments, you risk losing your home.
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