How to Protect Your Mortgage

Many consumers have mortgages that have gotten progressively expensive, as interest rates have climbed higher. A record number of homes are now in foreclosure. But if you take preventive, proactive measures to monitor and protect your mortgage, you can rest assured that your finances and your home will be safe and secure.

With subprime mortgage troubles and bad loans making daily business headlines, it's comforting to believe that these kinds of financial clouds are far removed from your own personal sky. But mortgage problems are cutting across all demographic categories, affecting people across the U.S. in every economic bracket. There may be a mortgage advisory posted in your area.

Even homeowners who feel confident that they face no risk are getting rude wake-up calls as a variety of economic forces have driven foreclosure rates to historically high levels. Climbing interest rates, resetting of adjustable-rate mortgages, the prevalence of interest-only and no-money-down mortgages, and falling real estate values, are all contributing to a darkened mortgage sky that could erupt into a hard rain at any moment.

If you aren't sure what condition your mortgage is in, you're not alone. Most Americans pay little or no attention to their loans, except when first applying for one to buy a home. Ironically, we tend to scrutinize other investments such as stock portfolios, retirement accounts, and car purchases much more than we do our mortgages-even though they typically represent the biggest financial commitment of all. But by fine-tuning your mortgage, you can save substantial amounts of money and, in some cases, head off a financial storm before it has time to rain.

Steps to protection

Experts recommend that you regularly do a basic evaluation of your mortgage. Take into consideration how long you plan to live in your home, how much equity you have, and what monthly payment amount matches your budgetary comfort level. Your equity may have risen, for example, allowing you to cease PMI payments. You might not realize this without a mortgage analysis. Your plans or income may have changed since you purchased the house, giving you more options for selling or refinancing.

If you have an adjustable rate mortgage, check the calendar. The majority of ARMs are scheduled to "reset" to a higher interest rate, causing your monthly payment to spike. If your loan has negative amortization, is interest-only, or a hybrid where you pay only interest and no principal, you may be inviting trouble to your door. The solution: Switch to a conventional 30-year fixed rate loan. These currently have historically low rates and are safe and predictable.

Mortgage monitoring

The time spent monitoring and adjusting a home loan can pay for itself many times over in saving you stress money. When you review your mortgage loan, you may find unexpected treats like accumulated equity, or a lender with rates that are lower than what you currently pay. Best of all, you'll have your finger on the pulse of your most significant investment, to better protect your home and your financial future.