Finding extra money to pay down the mortgage

As we battle through a recession, millions of homeowners are wondering how they can accelerate paying down the principal balance on their mortgages when it takes all their money just to make ends meet. But believe it or not, it's possible to do both. Here are some ways of finding extra money that won't require you to work additional jobs or break any laws:

Rent out a room in your house

Craigslist is a great place to advertise when renting out a room in your home, but spruce up the empty space first with new flooring, and paint the walls a warm, inviting color. Stark white walls don't translate well online. They can appear harsh and clinical.

These are a few important things to know about vetting your potential roommate:

• Check their credit and rental history
• Verify all sources of income
• Verify all personal and business references
• Make sure they have enough money in the bank to cover the rent in the event they lose a job or source of income

Once those bases are covered, then you're set to go!

Rent your house; move to an apartment

This is becoming a common way for distressed homeowners to stay afloat while paying down the mortgage; you have someone paying your rent to cover your mortgage payments while you save money living somewhere less costly. In the end you could actually make money with this arrangement. Plan it well. In addition to the items listed above you want to make sure to do the following:

• Get homeowner's insurance that covers damage caused by tenants. This is often a rider, so check with your insurance company as it isn't covered under an owner-occupied policy.
• Secure a new home inspection for any issues that may be brewing under the hood.

Refinance to lower your mortgage rate

Many homeowners bought homes when the rates were relatively higher than they are today. A 2-3% rate drop on your mortgage could potentially mean hundreds of dollars in savings each month. Call your bank to discuss your options and see what programs they may have available to you. Don't worry if you're underwater, there are several government programs to help homeowners in those circumstances.

Every situation is unique and warrants some time to think about what works and what doesn't. Some may be okay with getting a roommate while others may be better off refinancing or renting out the home altogether. Crunch the numbers and determine what fits your needs. Then make a decision that works for you.