Tuesday, June 23, 2015

How to Reduce Your Mortgage Payment Significantly

Imagine finally saving up enough money to make a down payment on your first new home and when you finally get the rates for your mortgage you are stunned. They are higher than you ever thought possible and are already considering whether or not you can even afford them. 

When purchasing a home, you start with a set mortgage rate. In the beginning, the majority of your payment goes towards interest but as you reach the end of your loan the payments being made are the principal. If you feel as though your mortgage rate is too high, there are several ways to lower it.

Pay Off 20% of Your Home

If you have purchased your house with less than a 20% down payment, you are paying private mortgage insurance (PMI). This can tack on thousands of extra dollars every year. 

After you have reached the point where you own 20 or more percent of your home, contact the bank. They will look at your loan and drop this PMI. Be aware that this is not something that happens automatically and you might have to be proactive to save this money.

Extend the Life of Your Loan

Shorter 15 or 20-year mortgages come with a higher monthly payment. Refinancing to a conventional 30-year mortgage will help to make your monthly payment fall dramatically. One factor to be aware of when choosing this method to reduce your payment is that your interest rates will go up. You can, however, pay more than the monthly payment to get rid of your interest quicker.

Pay Your Mortgage Insurance at the Start of the Year

When your mortgage insurance is added on to your monthly payment, it can be a significant amount of cash. Instead of paying the same amount each month for many years, ask your lender about paying it all or part of it off at the time of closing. When you pay it off all at once, you are not going to be stuck paying the same amount each month until it is naturally paid off. This will result in a substantial amount of savings.

Explore Your Homeowner's Insurance

Every once and a while you should be exploring your options for homeowner's insurance. What was the lowest rate when you purchased the home may not be the lowest rate available to you now. Take some time and explore different providers. 

Request free quotes and see if you can get your insurance cheaper. When insurance is escrowed into your monthly payment, a lower insurance cost will be noticeable when you pay your mortgage bill every month.

No matter what you are doing with your mortgage, you should never just sit and pay the same amount year after year. Explore new options and potential ways to save on your monthly bill on a regular basis as there are many options for individuals to make changes. Talk to the bank and loan providers to discover ways to lower your cost.

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