Eliminate Debt to Make Most of Lower Mortgage Rates

Fact: Mortgage rates are at an all-time low. Fiction: A lower mortgage is the answer to all your prayers.

The average rate for a 30-year mortgage fell to around 5 percent recently. That's pretty convenient because it means rates won't be adjusting significantly higher, as many have feared, and - if you're lucky enough to be able to refinance - you could significantly lower your monthly payment. But if reduced rates solved everybody's problems, foreclosures would come to a halt, consumer spending would rise and we'd certainly stop worrying about the recession.

No, there are too many other factors. Many of us are still unemployed - or worried about becoming unemployed. We're still dealing with the fallout from falling home values. And, most significantly, we're still in debt. Lots of it.

If you don't change your current situation, relief from lower rates will be short-lived. Mark my words, mortgage rates will go up again. And they'll go down. And they'll go back up. Do you really want your financial security to rest on a seesaw?

Fortunately, there's a way to stabilize the cyclical nature of the market - at least on a personal level. Free yourself from debt and you won't have to worry quite as much about your mortgage payment. Nor will you have to show excessive concern over rising gas prices (also inevitable) or increasingly expensive milk and bread. The more of your current obligations you eliminate, the more money you'll have - regardless of what the market is doing.

So how can you do it? Well, first you'll need to stop spending beyond your means. Take a look at your monthly expenditures and brainstorm ways to make changes. It helps to start with the extras. Are you making too many Starbucks runs? Make your own coffee and save $20 a week. Maybe you've got a handful of subscriptions to magazines you never read - or could read for free online. Cut them out to save $50-100 a year. Okay, now look at the necessities. Can you switch to some generic brands at the grocery store? Generic cereal looks the same, contains the same ingredients, and costs half the price. For more ideas, check out our free Financial Toolkit - it's got tips that could save you thousands of dollars per year, the equivalent of a raise at work.

Of course, these kinds of changes are easier said than done, right? If you find it too much trouble to stick to a budget - or you simply can't afford to budge another inch - help is in order. Uncle Sam has given you another chance, otherwise known as bankruptcy.

Filing for bankruptcy will give you protection from creditors while you work out a way to repay - or discharge - your debts. To find out if there's a bankruptcy plan that meets your needs, sign up for a free personal debt analysis with one of our Chicago bankruptcy lawyers. You don't have to wait for the economic pendulum to swing in your favor - take your financial future into your own hands. We can help you do it.

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