If you feel like you’re paying too much each month for your mortgage, you should know that it doesn’t have to keep going that way. There are ways to reduce your mortgage payments, saving you money each month. Here are a few ways that you can cut costs on your mortgage.
1. Modify Your Current Home Loan
You may be able to change the terms of your home loan as a way to reduce mortgage payments. For instance, you might be able to extend your loan’s repayment term so that your payments are stretched out over a longer period of time. However, you’ll wind up paying more in interest that way, so use this method with caution. You may also be able to change your payment terms so that you pay a bi-weekly payment. This means that you pay less in interest.
There are federal programs to help modify your loan to reduce mortgage payments if you’re experiencing financial hardship. You’ll need to meet certain requirements, but it’s worth asking your lender if they can offer you any of these programs to help you make ends meet when financial times are tough.
2. Cancel Your Mortgage Insurance
If you purchased your home with a low down payment (under 20%), you’ve been paying for private mortgage insurance. However, you don’t have to have PMI once you owe less than 80% of your home’s value on your mortgage. Cancel it and you may reduce mortgage payments between .5% and 1% of your home’s value each year.
3. Appeal Tax Assessment
Taxes make up a hefty portion of many monthly mortgage payments. While it’s really nice to know your property taxes are being handled through your mortgage company and you’re not going to have a big tax bill at the end of the year, you may be paying too much in taxes. Make sure you look at your tax assessment each year to be sure the value the tax assessor assigns to your home is fair. If it’s overvalued, you can appeal the assessment.
4. Shop Around for Home Owner’s Insurance
Your home owner’s insurance may also make up a sizeable chunk of your mortgage payment if you have it set up through an escrow account with your mortgage company. Once again, it’s nice to not have to think about paying that bill, but the convenience may translate to you not realizing you’re paying more than you must for home owner’s insurance. Shop around and see if you can find a better rate so that your payment can go down
You may have to specifically ask your mortgage company to reassess the amount you put into escrow each month so that you can reduce mortgage payments, otherwise, they’ll keep collecting the same amount and cut you a check for the difference.
5. Refinance to Reduce Mortgage Payments
You could reduce mortgage payments by refinancing your mortgage. When is it time to refinance? If any of the following situations apply, you might consider going ahead with a full refinance.
- Interest rates are much more favorable than they were when you bought your home.
- Your credit has improved substantially or you’re more qualified to borrow now than when you bought your home for some other reason.
- You want cash from your home equity to invest back into your home or take care of other expenses.
Reduce Mortgage Payments: Key Takeaways
If your mortgage seems to be getting the better of you, know that you do have options. However, it’s important that you be sure to carefully consider the long-term repercussions of each option available. Speak to a financial advisor to learn more about all the options available to you to reduce mortgage payments.