Are you unhappy with your monthly mortgage payments?
A mortgage payment that’s too high can take up a large chunk of your monthly income. This can leave you with very little to cover the rest of the expenses for the month. But if you’re new to mortgages, you might think you’re stuck paying this high amount.
That’s not the case though! Keep reading for these 6 ways you can achieve lower mortgage payments to ease your finances.
1. Make Your Repayment Term Longer
One of the simplest ways to lower your mortgage repayment is to extend your repayment term. This isn’t the same as refinancing, most lenders will offer this for a fee of around $250.
If you extend a 15-year mortgage to a 30-year one, this decreases your payment as it’s spread over more time. You will end up paying more interest over time, but it provides an immediate solution to cash flow issues.
2. Do a Mortgage Refinance
If extending your terms isn’t an appealing way of cutting costs, then don’t worry, a lot of people don’t want to either. Another option is to refinance which can reduce interest rates. In turn, this can lower the amounts you pay each month.
But this relies on you having a good credit score to get the best rates and the best chance of lowering payments. If you’re choosing these options, make sure to go with a lender with low fees.
You must shop around and look at a few different lenders at least. A comparison site can help you compare rates across many different lenders. You can check here if you want to learn more.
Credible is one site you can use that shops across many different lenders. You can see current rates, and compare that to the offerings on the table. And there is an online application process that makes it easy and quick, you could apply in a few minutes!
Fiona is another option for refinancing to help lower your mortgage rates. You give your current loan balance, the current value of your property, and your credit score. You then get side-by-side comparisons from many lenders in one place.
This is free and there is no obligation to take one of the offers. It offers a chance to see what’s out there and if you can save money (and how much you can save). If you like an offer, you continue with that lender to complete their application.
At this point, the lender checks your credit and may ask for documentation to support you. There may also be some other requirements the lenders have.
Fiona provides access to marketplace lenders in one easy place. It doesn’t handle the application process, that needs to go through any lender you choose. As such, there will be varying turnaround times depending on the lender you’re going with.
3. Redo Your Home’s Tax Assessment
If you have an escrow on your home, the property tax could be a huge chunk of your monthly mortgage payment. How they’re determined is via your county’s assessment of the value of your home or land.
This assessment is different from an appraisal as the county only does it for tax reasons. For some urban areas, counties can overvalue homes causing the taxes to be too high.
As the owner, you can ask to have this assessment redone. You need to file this request at your county office. Ask for a hearing with the State Board of Equalization. If they approve your protest, your property tax rate will go down, along with your repayments.
4. Have an Interest-Only Mortgage
One of the types of mortgage available is interest-only (I/O) where you don’t pay the balance right away. They work in two parts, with the first being you only pay the interest payments on your mortgage. The second part is when you start paying the principal and that interest on top.
For a 30-year mortgage that has the first 5 years I/O, you might seem to have low payments at first. But you will need to pay off the principal in the remaining 25 years.
If you use an I/O as a temporary way to lower your payments it can be a great way to take some pressure off. But they only work if you can factor in the increased payments once that interest payment phase is over. This is an important factor to consider.
5. Pay Off Your PMI
If you paid less than a 20% down payment when you bought your house, you likely have mortgage insurance to pay. This is on top of your monthly mortgage repayments. Over the time of your loan, this can add tens of thousands of dollars.
You can get rid of your PMI though. First, you need to pay off your mortgage until you have 20% equity at the very least. Then, you ask your mortgage advisor or lender to remove the need for PMI.
At this point, your lender might send an appraiser out to confirm the equity percentage you claim to have. If that checks out, then the PMI can go, and your mortgage payments will reduce.
If you don’t get it removed, then use a comparison site like Policygenius that will check if your PMI rate is too high. You can compare many different rates, all in one place.
6. Rent Out Spare Areas of Your Home
If you have spare space, getting a tenant could help reduce your monthly mortgage costs. The rates won’t change, of course, but that extra income can take a lot of pressure off. If you have a spare bedroom, basement, or living space, it’s well worth finding a trusted tenant or friend to rent it.
Even if the rate is as low as $300 a month, it’s still going to put a dent in your monthly expenditure. It’s a great option if you can refinance or don’t want to extend your loan period. It can be as temporary as you like within tenant regulations. And it could take pressure off all your bills, not only your mortgage.
Get Lower Mortgage Payments the Easy Way
So, there you have it! Now you know these 6 tips on how to get lower mortgage payments you’re on your way to big savings.
Some of these will come down to personal preference. Some people won’t mind extending their loan term, while others will prefer refinancing. For some, both aren’t an option, and then it’s an idea to consider alternatives like renting a room. At the end of the day, you need to think about what works best for your financial needs.
If you found this article helpful, check out our other blog posts today!