February 24th, 2018 7:23 AM by Jackie A. Graves, President
Your mortgage is
probably your biggest expense every month. So how can you make it smaller?
are many ways to lower your monthly mortgage payments, but they may not all be
right for you (and some take more doing than others).
to lower your payment
involves replacing your
current mortgage with a new one that offers a lower interest
rate. Several factors influence whether you’ll want (or be able) to refinance.
First is whether current interest rates are low enough justify the fees and
closing costs that come with a refi: Generally, you’ll want to see a difference
of at least 0.5 to 1 percentage points. You also should ensure your mortgage
has no prepayment
penalty; if it does, refinancing to lower your payment may not make
approach is to attempt what’s called mortgage recasting. With that option, you make
a decent-size payment toward principal. Then, your lender can re-calculate your
monthly payments based on that new balance (but on the same loan term). The
reduced loan amount means smaller monthly payments and less total interest paid
over the course of the loan.
might also try to eliminate your private mortgage
insurance (PMI). PMI is assessed when your down payment is less
than 20 percent, and could cost 1 percent or more of the total loan value each
year. If you pay down your mortgage to the point where you have 20 percent
equity in your home, you can ask your bank to remove the monthly PMI.
you’re in financial distress, the government offers loan modification programs aimed at
helping with financial hardships. There are stringent eligibility rules, but
your lender can offer more information and help you learn whether you’d qualify
for short- or longer-term relief.
example, you could extend a 30-year mortgage into a 40-year loan. Not every bank will allow it,
and you’ll have to make your case, but the longer term means lower monthly
payments. Still, the difference may too small to justify the eventual higher
total cost of the loan due to paying interest for a longer period.
methods that can reduce payments don’t have to do with the mortgage itself. You
can try to lower your property tax bill to reduce
the escrow payment that typically makes up much of your monthly mortgage
payment. Tax assessments are sometimes too high following real estate market
corrections or local rezonings, for instance. If you think that could be the
case for your house, consider appealing your property’s value to the relevant
state or local decision makers.
though it’s not the most appealing prospect, you could consider getting a
roommate. If you have space to spare, the extra money they’ll contribute can
lead to substantial savings—perhaps even enough to outweigh the inconvenience
of sharing your home.
though it’s not the most appealing prospect, you could consider getting a roommate.
If you have space to spare, the extra money they’ll contribute can lead to
substantial savings—perhaps even enough to outweigh the inconvenience of
sharing your home.
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