The largest expense many United States households have every month is their mortgage payment.
This is why the nation is currently experiencing a minor boom when it comes to refinancing.
Mortgage rates are remaining low as homeowners continuously refinance their home loans.
The ability to refinance a home is not an option that everyone can access, however.
If you have recently decided to become self-employed, or have begun working through a tax lien, for example, you may have a difficult time refinancing.
Make Changes in What You Pay
The cap for a mortgage loan is usually at thirty years.
During this time, the amount of interest paid by the homeowner can accumulate to a significant amount.
When considering where mortgage rates are at right now, taking out a 30-year loan at the $417,000 mortgage loan limit for 2016, would result in you paying over three hundred thousand dollars-worth of interest to pay the loan off.
That is a lot of money.
The following methods may not immediately lower your payment, but they do cut down on the overall balance of your loan.
This will provide you savings in the long-term.
You should also remember that the smaller your loan balance is, the less you will pay the bank in interest for your loan.
Here are somethings that you can do to lower your mortgage payment.
More details about each can be found below:
- Pay one extra time every year
- Round up your balance every month
- Utilize a bi-weekly payment plan
- Change up the loan structure
- Cancel your insurance
- Consider requesting loan modification
- Request lower property taxes
Pay One Extra Time Every Year
You can prepay your mortgage any time that you want.
All you have to do is pay your lender a separate payment when you pay your regular fee.
If you make just one extra payment per year, you can reduce the length of your loan by around four years when you take the current mortgage rates into consideration.
The following formula provides an idea about the amount of money making one extra payment every year can save you over time.
Round Up Your Balance Every Month
Every month you pay your mortgage.
When you do, round the total up and pay the nearest hundreds of dollars.
For example, if you pay $1275 on your mortgage every month, send $1300.
The lender applies the extra amount to the principal balance when they receive your payment.
This reduces the total amount that you owe.
As the total amount you owe is reduced, the amount of time that you have to pay the loan is also reduced.
This saves money.
While rounding up does not provide the same amount of savings as making an extra payment every year, it does cut down on what you are going to pay in the long-term.
As you round up each month, you can shorten your time under the loan by two or more years.
The amount of time that you reduce your loan depends on the size of the loan and how much time is left before the term is up.
Utilize a Bi-Weekly Payment Plan
Numerous lenders will provide you the option to partake in a bi-weekly payment plan for your mortgage.
This allows you to pay your balance every other week instead of once a month.
Think about the fact that there are 52 weeks within one year.
This means that you will pay half the loan 26 times within a one-year time.
This means that you make 13 payments for the full amount in a year.
So instead of making twelve payments, you are making thirteen.
This option is typically comparable to making an extra payment each year.
However, you need to decide bi-weekly payment program is worth it with the lender that you have.
Change Up the Loan Structure
If you change your mortgage payment, then it can provide you with savings over time.
However, what do you do when you need help now?
The following points are aimed at assisting with this issue.
Cancel Your Insurance
When you purchased your home, you may have utilized a low-down payment loan or made use of a conventional type of loan where you paid less than 20% of the amount down.
If this is true, then you may be paying for private mortgage insurance.
However, you should realize that private mortgage insurance is not supposed to be a forever thing.
This is particularly the case because the values of homes are currently up.
When home values rise, it reduces the loan-to-value ratio for the home.
If this is the case, you could be in a position to call your lender and cancel your private mortgage insurance.
First, you need to contact your lender and ask if you can have your private mortgage insurance taken off.
The lender is going to either say yes or no.
You have three options that you can make use of if you are denied but still want to proceed with removing the private mortgage insurance.
- You can reduce or loan-to-value ratio to 78% by making a large payment. If you do this, the private mortgage insurance should cancel.
- You can add features to your home that will enhance its value. Once you insert the features, have the home appraised.
- You can ask to have a home appraisal conducted.
Remember that you may have to call your bank in order to cancel your private mortgage insurance.
Make sure that you take notes concerning each phone call.
These notes will be helpful if you end up talking to more than one bank representative.
Consider Requesting Loan Modification
Sometimes, homeowners are unable to make their mortgage payment every month.
If this is you, then you are in danger of getting behind on your payments.
You need to get in contact with your lender as soon as you can.
You should contact your bank and see if you qualify for loan modification.
Banks are usually willing to work with the owner and ensure their needs are met.
Banks are given incentives by the government to participate in these programs.
You should seriously consider this option.
Request Lower Property Taxes
The National Taxpayers Union says that up to 60% of the homes in the United States are over assessed.
In other words, most homeowners in the United States pay too much money on their property tax.
If you want to appeal the assessment of your home, there is a formal process in place to assist with this.
All you have to do is contact your local taxing authority or check the process with the local government.
When you have your home reassessed, it can reduce the amount you are paying for property taxes by at least 10%.
