Lowering your mortgage payments should be something that everyone is focused on. Who doesn’t want to save money? Especially when for most people the mortgage is the largest monthly payment that we make. There are many factors which contribute to the total cost of your monthly mortgage payment. Below, we will show you a few ways to accomplish this without refinancing. Then at the end, we will still show you a few refinance tips anyway.
90% of lowering your monthly payments is all about just getting up off of the couch and making it happen. It is right there for you to do. You are not stuck with this large payment and you can do something about it.
Lower Your Mortgage Interest Rate
Many lenders or banks do not advertise this and not all offer this as an option. If your current interest rate is higher than what the going rates are today, we suggest that you call your lender and ask them to lower your interest rates on your current mortgage. I am not talking about refinancing but a rate adjustment. If your lender offers this as an option, you may have to pay a few hundred dollars as a fee to make this happen. It could be worth it and potentially also could save you hundreds per month. At one point, I had a 15 year fixed mortgage and noticed that the rates continued to drop. For a fee of $300, they reduced my rate for the balance of the loan which also immediately lowered my payment. Try this immediately.
Re-Amortize Your Mortgage
This process is basically re-setting your mortgage for another 30 years (for example) BUT doing it on your remaining balance. Let’s say your original mortgage was for $200,000 but now you have a balance of $150,000. When your lender re-amortizes the mortgage, they would re-start it for a new 30 years BUT the payment would be calculated on $150,000 vs $200,000. In theory, this should reduce your P&I payment by 25%.
Remove PMI Payments from Your Mortgage
If you financed your home with less than 20% down, you may be paying monthly PMI as part of your mortgage payment. PMI is typically removed when your loan balance is paid down to below 80% of the original purchase price. However, some lenders allow you to have PMI removed if the loan balance is below 80% of the current home VALUE. Call you lender to find out your options. It may cost you a few hundred dollars to get an appraisal, but you could make that back after the first two months of not having PMI
Have your Home Re-Assessed for Tax Purposes
In many instances, a home’s tax assessment may be too high. If you believe that it is, then I suggest visiting your municipality to find out how to challenge the assessment. It could mean that you would have to get recent sales comparables (comps) from similar homes in your area. OR, compare the assessment for those similar homes to yours. Be careful though…. you could end up increasing your assessment if you are not careful. The result of your efforts could lead to lower taxes which in turn would result in lower mortgage payments.
Shop for Cheaper Homeowners Insurance
Although your homeowners insurnace is not a huge portion of your monthly mortgage payment, everything adds up. You will be surprised to find out that your insurance agent does not always shop better deals for you. You need to call on occasion as a check in and then also shop for a better insurance company. Make them work to get you the best rates. Check your coverages and limits to see if they make sense for you. Sometimes increasing the deductible or lowering a coverage amount can make a big difference in your insurance premium.
Reduce Your Mortgage Escrows
When you close your loan, the lender will setup an escrow account for taxes and insurance. If your taxes or insurance go up, they will raise the monthly escrow payment. However, they do not always automatically reduce your monthly payment if your taxes have declined. Then, what is happening is that you start adding too much to your escrow account. We suggest taking a look at this to be sure you are paying the right amount each month.
Refinance To Lower Your Mortgage Payment
The obvious thing is if your current interest rate is much higher than the prevailing rates today, then yes if you simply refinance your current mortgage then your payments should be reduced. Here are some specific programs that can help which may be different than what you have today.
- Adjustable Rate Mortgage Refinance – You may currently have a fixed rate mortgage and maybe you also have a decent rate. If you are concerned about your short term payments and do not mind the risk involved with an adjustable rate mortgage, then this may be for you. Also, if you know you are not going to be in the home for a long time, then this absolutely is an option for you. Typically, the interest rates on adjustable rate mortgages are lower than with fixed rate mortgages. Let one of our lenders help to take you through your options.
- Interest Only Home Loans – Interest only loans are available through various lenders. It is a loan program that gives you the option to pay just the interest only. You can still send more when you have the extra funds to go towards your loan balance, but it is not required. This is actually a great option for people who do not plan to be in the home for a long time OR if you are anticipating the value of the home to increase significantly over the next few years. You will be building equity as the home value increases.
- FHA Streamline Refinance – If you have an FHA loan, you can use the FHA streamline refinance program to refinance to a lower rate which will lower your payment. Of course, rates need to have declined since you got your original loan. You must also have had your original loan for at least 210 days before you can refinance. Since you can roll the closing costs into the loan, this becomes a great option.
- VA Streamline Refinance – If you are a veteran and already have a VA loan, then you can easily refinance to a lower rate just like with the FHA streamline refinance.
- USDA Streamline Refinance – Same as above