Simple Techniques for Lowering Your Mortgage Payments
Dreaming of owning a home is a common goal for many individuals and families. As exciting as it may seem, being a homeowner comes with added expenses, the biggest being a mortgage payment. While paying off your mortgage may seem like a daunting task, there are simple techniques you can use to lower your mortgage payments and make homeownership more affordable. Let’s explore some of these techniques below.
Refinance Your Mortgage
Refinancing your mortgage is a popular option for homeowners looking to lower their monthly payments. The first step is to check your credit score, as it will have a significant impact on the interest rate you are offered. If your credit score has improved since you first took out your mortgage, you may qualify for a lower interest rate. A lower interest rate means lower mortgage payments. Furthermore, if interest rates have dropped since you first got your mortgage, refinancing can help you take advantage of the lower rates, resulting in lower monthly payments. However, keep in mind that refinancing often comes with closing costs, so make sure to weigh the costs against the potential savings before making a decision.
Extend the Repayment Term
If refinancing is not an option for you, another way to lower your mortgage payments is to extend the repayment term. A longer repayment term means smaller payments spread out over a more extended period. For example, if you have a 30-year mortgage, extending it to 40 years will lower your monthly payments significantly. However, this option will result in paying more interest over the life of the loan. So, while extending the repayment term can make your payments more manageable in the short term, it is important to consider the long-term costs.
Make Extra Payments
Another effective technique for lowering your mortgage payments is by making extra payments towards your mortgage. This will help you pay off your mortgage faster and lower the total interest you pay over the life of the loan. You can make extra payments in different ways, such as making bi-weekly payments instead of monthly, which essentially equals making an extra payment per year. Alternatively, you can allocate any extra income, such as a bonus or tax refund, towards paying off your mortgage. Not only will this lower your monthly payments, but it will also reduce the total amount of interest you pay.
Eliminate Private Mortgage Insurance (PMI)
If you put down less than 20% when buying your home, you are most likely paying Private Mortgage Insurance. This insurance protects the lender in case you default on your mortgage. However, once you have built enough equity in your home, you can ask your lender to eliminate PMI, resulting in lower monthly payments. You can do this by paying off a portion of your mortgage balance or by having your home appraised to prove that you have reached 20% equity in your home. Consult with your lender to determine the best course of action for eliminating PMI.
Consider a Loan Modification
If you are struggling to make your mortgage payments and refinancing or extending the term are not feasible options, you can consider a loan modification. This involves modifying the terms of your existing loan to make your payments more manageable. You can negotiate with your lender to reduce your interest rate, extend your repayment term, or even reduce the principal amount owed. However, keep in mind that a loan modification may lower your payments in the short term, but it may result in paying more interest in the long run. It is crucial to carefully consider the terms before agreeing to a loan modification.
Conclusion
Lowering your mortgage payments may seem like a daunting task, but with these simple techniques, it is possible to make your mortgage payments more affordable. Remember to assess your options carefully and consult with a financial advisor or your lender before making any decisions. With some effort and planning, you can successfully reduce your mortgage payments and make homeownership more attainable.
