You may be eager to carve out a little more wiggle room in your budget. You may have a desire to spend your hard-earned dollars elsewhere. Or, you may simply be a naturally thrifty soul who enjoys saving money wherever you can. Whatever your reason, knowing how to lower mortgage payments can certainly come in handy.
How to Lower Mortgage Payments
Home loans aren’t one-size-fits-all financial products. Strategies for lowering their monthly payments vary as well. That’s a positive thing for borrowers who are eager to trim the size of their home loan payments. It means that you can explore the options for how to lower mortgage payments, weigh their respective pros and cons, and choose the one that best fits your situation.
When you refinance your mortgage, you get a new home loan that pays off your current loan and replaces it with a different loan with new terms. It takes time and effort, and there are costs involved, so it’s a move that you’ll want to consider carefully before you make it. However, as NerdWallet points out, there are two ways that you may be able to use refinancing to lower your mortgage payment:
- Refinance to get a lower interest rate. A lower interest rate means that it costs less to borrow money. Generally speaking, snagging a lower interest rate means that you’ll not only pay less each month but also pay less over the life of the loan.
- Refinance to get a longer loan term. Extending the length of your loan increases the number of payments that you’ll make and spreads them out over a longer period of time. While you may have a slightly higher interest rate for this privilege, you’ll still enjoy a lower monthly payment as part of the tradeoff.
Ditch Your Mortgage Insurance
If you bought a house with a conventional loan and a down payment of less than 20 percent, then you’re probably paying private mortgage insurance (PMI). PMI protects your lender in the event that you default on the loan. It’s tacked on to your monthly mortgage payment, and it can add hundreds of dollars to the tab, so ditching it can provide substantial savings. As Money Under 30 explains, you’ll need to get your home equity up to at least 20 percent. Then, you can reach out to your mortgage servicer and request that the PMI be dropped. What if you used a government-backed loan? They handle mortgage insurance differently. VA loans don’t require it at all. With some other government-backed loans, refinancing is the only way to get rid of mortgage insurance.
Recast Your Mortgage
Refinancing is a fairly familiar term. Recasting gets far less press, but it does offer a way to lower your mortgage payment. According to Experian, recasting doesn’t wipe out your old loan and replace it with a new one the way that refinancing does. It reamortizes your loan. In other words, it creates a new payment schedule based on your current balance instead of your original one. When you recast a loan, your interest rate and term stay the same, but your payment can drop substantially.
Challenge Your Property Tax Assessment
If you look closely at your statement, you’ll see that your mortgage payment is the sum of many parts. For starters, there’s the principal, which goes toward paying back the loan amount. Then, there’s the interest. This is basically the fee that you pay for borrowing the money. Finally, there’s the escrow. If you’re paying mortgage insurance, that will typically be listed on your bill in this section. It’s also where you’ll see the amounts that are collected each month for your homeowner’s insurance and property taxes. The Balance suggests this connection could potentially be another way to lower your mortgage payment. If you believe that your property tax assessment is too high, you can reach out to the county and challenge the assessment. If you’re successful in getting your tax assessment lowered, then your mortgage payment will also go down.
Apply for a Forbearance Program
A forbearance program is a temporary fix that can protect your credit while you work towards a more enduring solution. As Credible indicates, forbearance programs allow you to temporarily pause or make reduced mortgage payments for a predetermined period. If you’re interested in participating in one of these programs, you’ll need to reach out to your mortgage servicer.
When you have questions about home loans or refinancing, don’t wait. Turn to the experts at PrimeLending West Texas for clear, user-friendly answers that you can trust. Contact us today to learn more about our services.