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The Best Tips on How to Lower Your Mortgage Payments

Posted November 2, 2019 by EasyFinance.com to Banking 1 0

There are different ways for you to lower your mortgage. If you want to learn how to lower your mortgage payments, you should click here.

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About 60 percent of homes in the United States are not yet mortgage-free.

If you’re paying a mortgage, whether it’s for your first or second home, it’s clear you’re not alone. For most people, a mortgage is the only way they can afford a home.

That said, keeping up with mortgage payments can take a toll on your finances, especially if your income reduces. The good news is there are steps you can take to lower your mortgage payments so that they suit your financial needs.

Continue reading to learn how to lower your mortgage.

Keep Mortgage Payments in Mind When Buying a Home

The journey to lowering your mortgage begins long before you’re approved for a mortgage. It begins when you’re making plans to buy a home.

You see, the cost of your home will have a direct impact on your mortgage payments. If you buy a costly home, you’ll need a bigger mortgage to finance it. A bigger mortgage attracts bigger monthly repayments.

As such, if your goal is to pay as little as possible toward a mortgage, it’s important to go for a property that’s well within your financial range.

Don’t buy an unnecessarily big or pricey home just because you can qualify for the mortgage. You’d rather buy a smaller, affordable home that you can comfortably pay for than buy a large, costly home that will back you into a financial corner.

Shop Around for the Best Mortgage

There are thousands of mortgage companies in the United States, each offering unique home loans.

If you’re still in the process of buying a house, you’re want to compare home loans offered by various mortgage companies. This will enhance your chances of finding the best offer.

But here’s the thing.

If you’re not a mortgage expert, it’s hardly possible to find the best deal on your own. This is why working with a mortgage broker can make a big difference in your future mortgage payments. This professional will assess your financial situation and use the knowledge of various lenders to help secure the best home loan.

Put Down a Larger Deposit

When applying for a mortgage, your lender will typically require you to make a down payment. This amount can be anywhere from 3 to 20 percent of the total value of the mortgage, depending on the type of mortgage and your creditworthiness.

If your goal is to lower your mortgage payment, then be sure to put down more than the minimum deposit. With a larger deposit, your outstanding loan amount will reduce, meaning lower monthly payments.

Extend the Term of Your Mortgage

What if you already own a home and feel like you’re struggling to service your mortgage?

Well, it’s not too late to lower your payments.

Your first strategy would be to extend the term of your mortgage, that’s if there’s room for extension.

A mortgage can last anywhere from 10 to 40 years. Shorter mortgages are typically cheaper because they attract lower interest rates. However, monthly payments are significantly higher.

On the other hand, long-term mortgages carry higher rates, but monthly payments are lower.

Here’s an illustration:

Person A has a $250,000, 10-year mortgage at 5 percent annual interest. To fully repay the loan, A will pay $3,125 every month for 10 years, for a total of $375,000.

Person B has a $250,000, 30-year mortgage at 7 percent annual interest. This person will pay $2,152 every month for 30 years, for a total of $775,000.

As you can see in the example above, extending a 10-year mortgage to 30 years will shave off about 1,000 bucks off your monthly repayments, but you’ll end up paying much more in total.

Refinance Your Mortgage

If extending your mortgage doesn’t seem like a financially savvy decision, another option is to refinance the mortgage.

Refinancing involves getting a new mortgage, usually at a better rate. The original mortgage is paid off. You can refinance with your existing lender or a new lender.

However, refinancing isn’t for everyone. If your credit score isn’t excellent and you have no positive equity in your home, it’s unlikely that lenders will approve your application to refinance.

But if you meet the requirements, refinancing can be an ideal way to lower your mortgage.

Do Away with Private Mortgage Insurance

At the start of your mortgage, your lender will require you to purchase private mortgage insurance. This protects the lender in case the property is foreclosed upon.

As time moves on, though, you’ll build positive equity in the home. This is the difference between the market value of the property and the mortgage balance.

With a good level of equity and a solid repayment record, your lender can agree to drop the PMI requirement. When this happens, your mortgage payments will reduce.

As a side note, lenders usually require borrowers to get PMI when they cannot make a 20 percent down payment. So, if you follow the advice above and put down a larger deposit, you won’t worry about PMI.

Get Expert Help

Sometimes your best efforts to lower your mortgage payments can hit a dead end. Maybe there’s little wiggle room in your finances or your lender isn’t balking.

This is when you need to get professional help. There are companies, such as Colonial Pacific, that offer specialized mortgage reduction services. Such a company will assess your situation and recommend suitable reduction strategies.

How to Lower Your Mortgage Made Easy!

Your mortgage is probably your biggest monthly expense. At a time when most workers are living paycheck to paycheck, an opportunity to reduce or even get rid of your mortgage is very welcome.

With this guide on how to lower your mortgage, you might just have found what you need to create some room in your paycheck. You just need to implement these tips.

Keep tabs on our blog for more personal finance tips and insights. 

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