This very unpleasant situation does require a considerable financial effort on your part, but it can be resolved eventually to your advantage. The two most reliable ways are: to make extra payments towards the Principal, or/and refinance into a Fixed Rate Mortgage.

How do extra payments help? The amount paid as Interest is a percentage of the outstanding balance (the principal part). The lower the balance - the lower the absolute interest payment. If your mortgage carries no principal prepayment penalties, you can pay some extra cash towards the principal. It may keep the absolute sum of your monthly interest payment close to intact on the one hand, and it will accelerate the overall payoff of the mortgage on the other. So none of your money will be wasted, but you may have to tighten your belt for a while.

Refinancing into a Fixed Rate Mortgage is not cheap either, so before you decide to turn to the stability of a fixed rate, analyze your current mortgage – make sure the change is worth it. Points to consider:

• a convertible loan feature that allows for an easier conversion of an Adjustable Rate Mortgage into a Fixed Rate Mortgage may already be included into your current contract.
• Compare the cost of refinancing with the gain on the saved interest.
• Your current adjustable rate mortgage very likely carries all kinds of caps. You have to see how they limit the rate and how much higher it can possibly get. It may well so happen that your highest rate will still be lower than the fixed rate.
• Watch out for the Payment Cap as the rates rise! Make sure it is not amortizing your mortgage negatively! If it is – refinance immediately into anything you can afford, before it brings your current balance to the size far beyond your financial potential!

Yes. Moreover, the sooner you pay off your mortgage, the more cash you save for yourself as never-charged interest. The most reliable way to achieve such a spectacular result is extra payments towards the principal. A mere $20 on top of your regular monthly payment can result in roughly $24,000 of interest savings! The idea is that your extra payments reduce the principal faster, the amount charged as the interest on the principal shrinks, too. You are free from your mortgage debt sooner and the total amount of cash paid towards the interest is considerably lower. How much sooner and how much lower depends on how much extra you are ready to pay every (or not every) month. If you are not sure you are disciplined enough to make regular extra payments yourself, you may consider a bi-weekly mortgage repayment plan as an alternative.

A very sophisticated, but quite an effective method to accelerate certain types of mortgages is a so-thought Australian ingenious invention called simply “Mortgage Acceleration”. The concept involves an interest only loan and a Home Equity Line of Credit (HELOC). It is not simple and the whole procedure has to be very well thought over and balanced to suit every particular situation. I am fighting the temptation to explain here how it works, because I want to make sure you consult a professional in person to work out all the details.

A reverse mortgage can become a considerable financial aid to retired seniors, who live in a property they actually own. The equity accumulated in their homes can be converted into cash, but the title to the property remains with the owners.

The reverse character of the mortgage is a sort of a reverse playback of the regular mortgage you had before while buying your house out. You had invested a lot of work and money into your property when you were younger. Now you can count on something in return, if you want it. The usual purpose of such a deal is to supplement the decreased after the retirement income and attempt to maintain the habitual life-style without having to really deprive yourself of certain joys of life.

Reverse mortgages are only available to people over 62 years of age. As to other rather non-numerous limitations, they include the ineligibility of cooperative housing (in New York however, I hear they have developed certain plans for this type, too) and the amount of equity you have built in your home. There are neither income nor medical restrictions. Even if you still have some moderate debt on your regular mortgage, you may qualify for a reverse one, and actually use some of its funds to pay the former one off, for the reverse mortgage must always be in a first lien position.

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