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Even after learning all you need to know about mortgages, saving for a downpayment, and strict and sustained budgeting, you may find yourself struggling to pay your mortgage. Refinancing, extending the term, and disputing property taxes are just a few of the many ways to lower your monthly mortgage payment. By delving into these practical approaches, individuals can attain a greater sense of control over their mortgage obligations, ultimately enhancing their overall financial well-being. Take control of your finances and start saving money today.
Lowering your mortgage to a manageable level may be as simple as refinancing to secure a lower interest rate. A 1% decrease in the interest rate can result in hundreds of dollars of monthly savings, so it pays to keep an eye on the market and contact your lender when rates decline. Among homebuyers’ most common mortgage questions, the majority typically revolve around interest rates and refinancing, and while the subject matter can be dense and confusing, taking control of your mortgage particulars could save you thousands of dollars.
You can also purchase discount points to buy down the rate, although this may not be cost-effective if you’re planning to move in the near future. Each point is 1% of the loan amount, and usually yields a 0.25–0.5% cut in the rate. Refinancing is different from recasting, where you make a lump-sum payment towards the principal. Whichever option you choose, it’s possible to trim your mortgage expenses.
Extending the term of your mortgage could make your payments more manageable. This option involves replacing your 15-year mortgage with a 30-year mortgage. The result is a lower interest rate and lower monthly payments. While this strategy may initially appear attractive, it can lead to significantly more interest payments over the life of the loan. However, if you find yourself struggling to make your current mortgage payments, extending the term of your loan could provide some welcome financial relief.
Plus, with a 30-year mortgage, you have the option of making extra payments in the future when your income rises. This flexibility allows you to adapt your mortgage strategy to changing financial circumstances. For example, if you come into a windfall of money, you can use it to make additional payments toward your principal. Over time, this can drastically reduce the amount of interest you pay.
Consider switching to an adjustable-rate mortgage to take advantage of an initial lower interest rate that’s fixed for a specified period. This can be a great way to lower your mortgage to a manageable level while also providing you with the flexibility to adjust the rate in the future. You can choose terms that range from one month to a decade and adjust the rate accordingly. You may even be able to use the savings from your monthly ARM payments to gradually reduce your loan balance.
It’s important to understand how the subsequent rate adjustments work and devise a strategy for managing potential increases in your monthly payments. You should also keep in mind that the rate will likely go up after the initial fixed period, so it’s important to plan ahead and budget for those potential increases.
Finally, if you plan to sell your home in the near future, the savings from your monthly ARM payments can be used to reduce your loan balance and leave you with more money in your pocket. This can be an effective way to maximize your return on investment and make the most of your home sale.
You can eliminate or reduce the cost of private mortgage insurance by refinancing your conventional or FHA loan. Refinancing a conventional loan once you have 20% or more equity, or refinancing an FHA loan to a conventional one, can drastically reduce your monthly mortgage costs. The amount of money saved each month will depend on the initial down payment and credit score when you purchased the home.
Eliminating private mortgage insurance can help you save money each month, so if you’re finding you can’t pay your mortgage but have crossed the 20% equity threshold, relief is possible. It can also help you pay down your mortgage faster and get closer to owning your home outright. Before you refinance, make sure to compare rates and fees from different lenders, and make sure you understand all the details of the loan.
Shopping around for homeowners insurance can help you find better coverage at a more affordable rate. It’s important to remember that insurance premiums tend to increase annually, so you should be prepared to shop around every year or two in order to get the best deal. Many companies are competing for your business, so take the time to compare quotes and coverage levels.
In addition to shopping for better insurance rates, you can also lower your mortgage by appealing your property tax bill. It’s important to check the assessed value of your home, as this is used to calculate your taxes. If you think the value is too high, you can contest it with your local county or municipality.
You now know some of the ways you can lower your mortgage to a manageable level. Refinancing, extending the term, switching to adjustable rate, and eliminating private mortgage insurance can all be helpful. Don’t forget to shop for homeowner insurance and appeal taxes to lower your mortgage even further. So why wait? Start taking steps today to reduce your mortgage and make it more manageable.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.