Monthly Payment Vs. Monthly Outgo By Drew Tyler At Isnare.com Ezine Articles

In this article I am going to explain a principle that people need to understand when they are trying to refinance their home to consolidate their debts and lower how much they spend each month. While it is a seemingly simple principle, many people have a hard time distinguishing the difference between their monthly mortgage payment and their monthly outgo.

Monthly outgo is a term used to describe how much money one spends toward all revolving debt each month. If a person has a $300 auto payment, $50 credit card payment, $35 credit card payment, $1,200 mortgage payment, and a $200 student loan payment their monthly outgo is $1,785.

The monthly mortgage payment is pretty self-explanatory; it is the amount of money that one must spend each month for their house payment. This may include taxes and insurance (escrow).

In the above example, the borrowers have a $1,200 monthly mortgage payment, but their monthly outgo is $1,785. Let’s say for example, we are able to refinance them and combine the two credit cards, and the auto loan into a their mortgage. After refinancing this new loan amount comes with a payment of $1,375. Their new monthly outgo is now $1,375 + $200 = $1,575. We have reduced their monthly outgo and saved them $200 per month. Yes, their mortgage payment has gone up, but they are saving money each month.

I know that this seems like an extremely simplistic concept, but until people are explained the difference, some have a hard time understanding what it means.

You can easily do these calculations on your own. However, just because there are monthly savings does not necessarily mean that a refinance is your best option. It very well could be in your best interest to refinance and take advantage of monthly savings, but there are dozens if not hundreds of available programs for you. Each program may have a different set of benefits to you, and you really should consult with an honest and ethical mortgage professional to determine what is your best move.

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