Unable to refinance? You can still cut costs


As much as they want to take advantage of low interest rates to refinance their homes, some homeowners just can't do it.

Maybe they are short of cash to pay for upfront closing costs and application fees. Maybe their homes have dropped in value or their career record is shaky and they can't qualify for a new loan.

Perhaps they don't plan to be in their home long enough to ge back the cost of refinancing the mortgage.

But even people who don't refinance can reduce their mortgage costs over the long term. Here are a few methods:

* Make biweekly payments -- 26 payments a year. Some banks allow borrowers to pay an amount equal to half of their regular monthly payment every two weeks. More money goes toward paying the principal. Every additional cent paid toward the principal works to reduce the total interest the borrower pays.

On a 30-year mortgage of about $117,000 at a fixed rate of 9.75 percent, for instance, paying every two weeks would shave about $72,000 and almost eight years from the life of the mortgage.

Some companies charge a fee to enroll borrowers in a biweekly payment program.

* Make one extra mortgage payment a year. This strategy also reduces long-term debt. Another advantage: The mortgagee builds equity faster and pockets more cash if he sells.

* Submit more than the minimum monthly payment to prepay the loan and reduce interest payments. Some lenders allow borrowers to pay any amount as often as they want, as long as it is at least the minimum due and is received on or before the due date.

Homeowners who choose any of these options should make sure the mortgage holder allows prepayment without a penalty.

They should also indicate on the payment stub and on the check that they want the extra amount to go toward the loan principal.

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