Time to refinance? Follow these tips for less monthly pain

If you’re struggling with a mortgage that has become hard to pay, due perhaps to an adjustable rate that adjusted itself upward more than you expected, you may want to refinance into a different, more stable, loan. After all, interest rates are still on the low side, historically speaking. You may want to consider refinancing just because current rates are lower than what you’re paying.

Refinancing involves taking out a new mortgage on your home — usually at a lower interest rate, decreasing the amount of your monthly payments (sometimes by as much as several hundred dollars). You can also increase the amount of the loan for such purposes as paying off credit card debt or making home improvements. (But beware: Your once-unsecured debt is now secured — with your home as collateral.) Alternatively, lower your rate, keep payments the same or even a little higher, and get a 15-year loan instead of 30-year one. You’ll enjoy massive interest savings that way.

Check out available loans and interest rates, and assess the costs built into each one. Consider what “points,” if any, you might have to pay. A point, equal to 1 percent of the value of your loan, is paid upfront in order to lower the interest rate. Make sure you plan to be in the house long enough for the reduced monthly payments to compensate for the points and closing costs of the new loan.

If you can get a new mortgage at a rate 1 or 1/2 a percentage point lower than your current mortgage, you can reap sizable interest savings over 15 to 30 years, depending on how much you borrow. For example, $100,000 borrowed at 7 percent instead of 8 percent for 30 years will save about $25,000 over the length of the loan.

Learn much more about home financing at www.fool.com/homecenter and www.quicken.com/mortgage/refinance. Ask your current mortgage lender about refinancing, too — you might get a good deal without having to jump through too many hoops, since the lender already knows you.

Ask the Fool

Q: Where can I learn about insurance? — T.M., Knoxville, Tenn.

A: Click over to www.fool.com/insurancecenter, www.bankrate.com and www.insureuonline.org for some good overviews. Or curl up with a copy of “Insurance for Dummies” by Jack Hungelmann (For Dummies, $22).

My dumbest investment

My dumbest investment is between not buying Vertex Pharmaceuticals at $10.50 per share when it first came to my attention (it’s now around $36), and selling Akamai Technologies at $18, for about a 30 percent gain. — D.D., Westerly, R.I.

The Fool Responds: There are gobs of companies that have done well that most of us missed. Even Warren Buffett has lamented not having bought into Wal-Mart at a certain time. We can’t latch onto every rising star. Fortunately, we only need a few in order to do well. Selling too soon is a common mistake. The trick is to figure out what a fair price is for the company. If you think a $14 stock is really worth $30, that it is healthy and growing briskly, and that it has a strong competitive position, don’t sell around $18. Akamai has had a bumpy ride, but those who bought for around $3 after the Internet bubble burst have seen a tenfold jump, as long as they held on patiently.